Interest rate caps on microcredit: evidence from a natural experiment in Bolivia Articles uri icon

publication date

  • August 2021

start page

  • 125

end page

  • 142

issue

  • 2

volume

  • 14

International Standard Serial Number (ISSN)

  • 1943-9342

Electronic International Standard Serial Number (EISSN)

  • 1943-9407

abstract

  • This paper evaluates the imposition of caps on microcredit lending rates through credit policies for productive sectors. This financial inclusion intervention provides a unique quasi-experiment, allowing to estimate its effect following a difference-in-differences analysis. Our results suggest that the imposition of interest rate ceilings negatively affected the portfolio balance of new microcredits and loans to Small and Medium Enterprises (SMEs) granted by Micro Finance Institutions (MFIs). The balance of the microcredit and SME loans portfolio granted by MFIs, relative to the company portfolio granted by banks, decreased by 26.1% for an average MFI for the period 2011-2018.

subjects

  • Statistics

keywords

  • interest rate ceilings; financial inclusion; credit access; microcredit loans; small and medium enterprises loans