The reason for the high interest rates is not basically cost of capital. In reality, the neighborhood microfinance organizations that get zero-interest loan capital from the web based microlending platform Kiva charge normal interest and expense rates of 35.21%. Before deciding loan value one should take these two costs, Administrative costs by the bank and transaction cost by the customer/customer. Henceforth, from a customer's perspective the cost of a loan is not just the interest and fees she/he has to pay, yet in addition all other transaction costs that she/he has to cover, allows for minimized groups to get a singular amount at one time so as to pay or save for specific needs they have.
The microfinance project of "saving through" is shown in Nairobi, Kenya which includes a Rotating Savings and Credit Associations activity. Customers, then again, may have expenses for venturing out to the bank office, getting official documents for the loan application, and loss of time when managing.