Working Paper

The Impact of Interest Rate Caps on the Financial Sector : Evidence from Commercial Banks in Kenya

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collection.link.5
https://openknowledge.worldbank.org/handle/10986/9
collection.name.5
Policy Research Working Papers
dc.contributor.author
Safavian, Mehnaz
dc.contributor.author
Zia, Bilal
dc.date.accessioned
2018-04-03T15:25:12Z
dc.date.available
2018-04-03T15:25:12Z
dc.date.issued
2018-04
dc.date.lastModified
2021-06-08T14:42:45Z
dc.description.abstract
Interest rate caps can have far-reaching consequences on the composition and maturity of commercial bank loans and deposits. This paper carefully documents these impacts on the formal financial sector in Kenya after the recent interest rate caps of 2016. Using bank-level panel data from before and after the caps, the paper identifies a significant decline in aggregate lending, an increase in nonperforming loans, and a change in composition of lending away from small and medium enterprises and toward safer corporate clients. Banks also shifted away from offering interest on current account deposits to preserve their interest margins. These quantitative findings are supported by qualitative evidence through detailed interviews of commercial bank executives, and have important implications for economic growth and financial inclusion.
en
dc.identifier
http://documents.worldbank.org/curated/en/681501522684167817/The-impact-of-interest-rate-caps-on-the-financial-sector-evidence-from-commercial-banks-in-Kenya
dc.identifier.uri
http://hdl.handle.net/10986/29606
dc.language
English
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Policy Research Working Paper;No. 8393
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
INTEREST RATE CAPS
dc.subject
FINANCIAL INCLUSION
dc.subject
COMMERCIAL BANKING
dc.subject
LENDING TO THE POOR
dc.subject
ACCESS TO FINANCE
dc.subject
COST OF CREDIT
dc.subject
MICROFINANCE
dc.subject
SMALL AND MEDIUM-SIZED ENTERPRISES
dc.subject
INTEREST MARGIN
dc.title
The Impact of Interest Rate Caps on the Financial Sector
en
dc.title.subtitle
Evidence from Commercial Banks in Kenya
en
dc.type
Working Paper
en
okr.crossref.title
The Impact of Interest Rate Caps on the Financial Sector: Evidence from Commercial Banks in Kenya
okr.date.disclosure
2018-04-02
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Policy Research Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/681501522684167817/The-impact-of-interest-rate-caps-on-the-financial-sector-evidence-from-commercial-banks-in-Kenya
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/1813-9450-8393
okr.identifier.externaldocumentum
090224b0858571d1_2_0
okr.identifier.internaldocumentum
29772487
okr.identifier.report
WPS8393
okr.imported
true
en
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/681501522684167817/pdf/WPS8393.pdf
en
okr.region.administrative
Africa
okr.region.country
Kenya
okr.statistics.dr
681501522684167817
okr.topic
Finance and Financial Sector Development :: Access to Finance
okr.topic
Finance and Financial Sector Development :: Banks & Banking Reform
okr.topic
Finance and Financial Sector Development :: Microfinance
okr.topic
Finance and Financial Sector Development :: Rural Finance
okr.topic
Rural Development :: Rural Microfinance and SMEs
okr.unit
Finance, Competitiveness and Innovation Global Practice; and the Development Research Group

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