found that broadly there were four components to the interest rate:

*Cost of funds
*Overheads
*Losses on non-performing loans
*Profit

Cost of funds

The cost of funds is the rate of interest that the financial institution must pay to borrow the funds that it then lends out. For a commercial bank or deposit-taking microfinance institution this is usually the interest that it pays on deposits. For other institutions it could be the cost of wholesale funds, or a subsidised rate for credit provided by government

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