Some people remain poor even with very high effective interest rates. Here is quote about poor fruit vendors in Chennai, India, who have an effective interest rate of 4.69% per day (from an excellent book about poverty called 'Poor Economics' [1])
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We have already seen, in the previous chapter, another example of people who had lucrative opportunities to save but did not use them: the fruit vendors from Chennai, who borrowed about 1,000 rupees ($45.75 USD PPP) each morning at the rate of 4.69 percent per day. Suppose that the vendors decided to drink two fewer cups of tea for three days. This would save them 5 rupees a day, which could be used to cut down on the amount they would have to borrow. After the first day with less tea, they would have to borrow 5 rupees less. This means that at the end of the second day, they would have to repay 5.23 rupees less (the 5 rupees they did not borrow, plus 23 paisas in interest), which, when added to the 5 rupees they saved that second day by again drinking less tea, would allow them to borrow 10.23 rupees less. By the same logic, by the fourth day, they would have 15.71 rupees that they could use for buying fruit instead of borrowing. Now, say they go back to drinking their two cups more tea but continue to plough the 15.71 rupees they had saved from three days of not drinking so much tea back into the business (that is, borrowing that much less). That accumulated amount continues to grow (just as the 10 rupees had turned into 10.71 after two days) and after exactly ninety days, they would be completely debt-free. They would save 40 rupees a day, which is the equivalent of about half a day's wages. All just for the price of six cups of tea!
As much as I think that government is partly to blame for a lot of systemic poverty problems, I'm going to have to agree with you. I think it's fairly obvious that the poor make bad "loans" even when the interest rates are higher.
At the end, it's all about moderation and planning. One can plan for a high-interest loan, heck I've had one (14%) until recently. It's definitely been an incentive to save, and work on getting it re-financed on better terms.
