Interest Rate Caps : The Theory and The Practice

Ferrari, Aurora ; Masetti, Oliver ; Ren, Jiemin

World Bank, Washington, DC

关键词: INTEREST RATE CAP;    CREDIT SUPPLY;    BANKING REGULATION;    SME FINANCE;    MICROFINANCE;   

DOI  :  10.1596/1813-9450-8398
RP-ID  :  WPS8398

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Ceilings on lending rates remain awidely used policy tool that is intended to lower theoverall cost of credit or protect consumers from exorbitantrates. Interest rate caps come in many forms and scopes and,according to their rationale, ceilings can affect a smallsegment or the overall market. Over the past years, manycountries have introduced new or tightened existingrestrictions, while only a few have removed or eased them.This paper takes stock of recent developments in interestrates caps globally and classifies them according to a noveltaxonomy. The paper also presents six case studies ofdifferent types of interest rate caps. The case studiesindicate that while some forms of interest rate caps canindeed reduce lending rates and help to limit predatorypractices by formal lenders, interest rate caps often havesubstantial unintended side-effects. These side-effectsinclude increases in non-interest fees and commissions,reduced price transparency, lower credit supply and loanapproval rates for small and risky borrowers, lower numberof institutions and reduced branch density, as well asadverse impacts on bank profitability. Given these potentialnegative consequences of interest rate caps, the paperdiscusses alternatives to reduce the cost of credit.