This pattern has two main implications. First, if we take loan size as a proxy for the poverty of customers (smaller loans roughly imply poorer customers), microfinance banks appear to serve many customers who are substantially better-off than the customers of nongovernmental organizations. Second, banks will have an easier time earning profits (assuming that a large fraction of the cost of making loans is due to fixed costs). When both large and small loans require similar outlays for screening, monitoring, and processing loans, the small loans will be far less profitable unless interest rates and fees can.
