The December 10, 2011, edition of The Economist contains an article entitled "Helping the Poor to Save: Small Wonder." This article discusses how many of the world's poorest people benefit from borrowing small amounts of money.
Instructions
Read the article and answer the following questions. (The article can be accessed by doing an Internet search that includes the title of the article and magazine.)
(a) What monthly rate of interest do people pay on the loans they borrow from the microfinance organizations described in the article? What would these rates be on an annualized basis?
(b) The rates described in your answer to part (a) are very high. Explain how somebody can pay such high rates and yet still benefit from borrowing.
(c) Describe the structure of the typical village savings and loan organization.