We would normally expect that if informal lenders attached different risks to different borrower categories, a possible way of doing this would be to apply differential interest rates. This has been found not to be the case in many cases (Aryeetey, 1994, Chipeta, 1994). In Ghana, Aryeetey (1994) has observed that interest rates charged by moneylenders really did not vary much. For a three month loan in 1992, an interest rate of 25-30% for the period was usual in urban areas. Rural interest rates were usually not much different from urban rates. Annualizing such rates is often not realistic since annual loans are seldom considered and the rate determination process differs when annual loans are being made. In the cases that repayment went beyond six months to one year, higher interest rates ranging between 50% and 100% of the principal for the period become observable. These rates were not much
different from rates observed elsewhere in Africa. Some lenders have been observed to have
interest rates that go beyond 100% for one-year loans (Chipeta and Mkandawire, 1994).