Publication:
Interest Rate Caps: The Theory and The Practice

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dc.contributor.authorFerrari, Aurora
dc.contributor.authorMasetti, Oliver
dc.contributor.authorRen, Jiemin
dc.date.accessioned2018-04-12T17:16:18Z
dc.date.available2018-04-12T17:16:18Z
dc.date.issued2018-04
dc.description.abstractCeilings on lending rates remain a widely used policy tool that is intended to lower the overall cost of credit or protect consumers from exorbitant rates. Interest rate caps come in many forms and scopes and, according to their rationale, ceilings can affect a small segment or the overall market. Over the past years, many countries have introduced new or tightened existing restrictions, while only a few have removed or eased them. This paper takes stock of recent developments in interest rates caps globally and classifies them according to a novel taxonomy. The paper also presents six case studies of different types of interest rate caps. The case studies indicate that while some forms of interest rate caps can indeed reduce lending rates and help to limit predatory practices by formal lenders, interest rate caps often have substantial unintended side-effects. These side-effects include increases in non-interest fees and commissions, reduced price transparency, lower credit supply and loan approval rates for small and risky borrowers, lower number of institutions and reduced branch density, as well as adverse impacts on bank profitability. Given these potential negative consequences of interest rate caps, the paper discusses alternatives to reduce the cost of credit.en
dc.identifierhttp://documents.worldbank.org/curated/en/244551522770775674/Interest-rate-caps-the-theory-and-the-practice
dc.identifier.doi10.1596/1813-9450-8398
dc.identifier.urihttps://hdl.handle.net/10986/29668
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 8398
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectINTEREST RATE CAP
dc.subjectCREDIT SUPPLY
dc.subjectBANKING REGULATION
dc.subjectSME FINANCE
dc.subjectMICROFINANCE
dc.subjectFINANCIAL INCLUSION
dc.subjectPREDATORY LENDING
dc.titleInterest Rate Capsen
dc.title.subtitleThe Theory and The Practiceen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleInterest Rate Caps: The Theory and The Practice
okr.date.disclosure2018-04-03
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/244551522770775674/Interest-rate-caps-the-theory-and-the-practice
okr.guid244551522770775674
okr.identifier.doi10.1596/1813-9450-8398
okr.identifier.externaldocumentum090224b085860ef7_1_0
okr.identifier.internaldocumentum29776199
okr.identifier.reportWPS8398
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/244551522770775674/pdf/WPS8398.pdfen
okr.statistics.combined22798
okr.statistics.dr244551522770775674
okr.statistics.drstats17595
okr.topicFinance and Financial Sector Development::Access to Finance
okr.topicFinance and Financial Sector Development::Banks & Banking Reform
okr.topicFinance and Financial Sector Development::Finance and Development
okr.topicFinance and Financial Sector Development::Financial Regulation & Supervision
okr.topicFinance and Financial Sector Development::Microfinance
okr.topicFinance and Financial Sector Development::Rural Finance
okr.unitFinance, Competitiveness and Innovation Global Practice
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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