Does the Grameen Bank exert market power over borrowers?

In this article, we use the recently developed stochastic frontier estimator of market power to test whether or not the Grameen Bank's lending rates are consistent with marginal cost pricing. We find that they are not and, on average, the markup is about 3% above marginal cost. However, the markup is considerably dwarfed when compared to the markups charged by commercial microfinance institutions. Their lending rates are reported to range from 97% to 165% above marginal cost.