Interest Rate Caps around the World : Still Popular, but a Blunt Instrument
Among other common forms of government financial control, caps on interest rates have been declining over the past several decades as most industrialized countries and a rising number of developing countries continue liberalizing their financial po...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank Group, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/10/20303403/interest-rate-caps-around-world-still-popular-blunt-instrument http://hdl.handle.net/10986/20494 |
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okr-10986-20494 |
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| recordtype |
oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCESS TO CREDIT ACCESS TO FINANCE ACCOUNTING ADMINISTRATIVE FEES ADVISORY SERVICES ANNUAL INTEREST RATE ANNUAL INTEREST RATES ANNUAL PERCENTAGE RATE APR AVAILABILITY OF CREDIT AVERAGE INTEREST AVERAGE INTEREST RATE AVERAGE INTEREST RATES BANK ACCOUNTS BANK ASSET BANK COMPETITION BANK LENDING BANK LOANS BANKING SYSTEM BANKS BOND BOND RATES BORROWING BUSINESS TRANSACTIONS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS COMMERCIAL CREDIT COMMERCIAL LENDING COMMERCIAL LOANS COMMERCIAL TRANSACTIONS CONSUMER CREDIT CONSUMER CREDITS CONSUMER FINANCIAL LITERACY CONSUMER LITERACY CONSUMER LOANS CONSUMER ORGANIZATIONS CONSUMER PROTECTION CONTRIBUTION COST OF CREDIT CREDIT BUREAU CREDIT BUREAUS CREDIT CARD CREDIT CARDS CREDIT INFORMATION CREDIT INFORMATION SYSTEMS CREDIT INSTITUTIONS CREDIT MARKET CREDIT PROVIDER CREDIT PROVIDERS CREDIT TRANSACTIONS CREDIT UNION CREDIT UNIONS CREDITOR CREDITORS CREDITS CREDITWORTHINESS CROP INSURANCE CURRENCY CURRENT ACCOUNT CURRENT INTEREST RATE DEBT DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT BANKS EDUCATED CONSUMER EDUCATIONAL LEVEL EMPLOYERS EXCESSIVE INTEREST RATES EXPLOITATION FAIR TRADING FARMERS FINANCIAL ACCESS FINANCIAL CONSUMER FINANCIAL COSTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL EDUCATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL LITERACY FINANCIAL LITERACY INITIATIVES FINANCIAL LITERACY PROGRAMS FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL MATTERS FINANCIAL POLICIES FINANCIAL PRODUCTS FINANCIAL REFORMS FINANCIAL REGULATOR FINANCIAL REGULATORS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR INDICATORS FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORM FINANCIAL SERVICES FINANCIAL SERVICES AUTHORITY FINANCIAL SERVICES INDUSTRY FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FORMAL CREDIT FORMAL FINANCIAL INSTITUTION FORMAL FINANCIAL INSTITUTIONS FORMAL LOANS GOVERNMENT POLICIES HIGH INTEREST RATE HIGH INTEREST RATES HOUSEHOLDS HOUSING LOANS INDEBTEDNESS INFORMAL FINANCIAL INSTITUTIONS INFORMATION ASYMMETRIES INPUT PRICES INSTRUMENT INTEREST RATE INTEREST RATE CAP INTEREST RATE CAPS INTEREST RATE CEILING INTEREST RATE CEILINGS INTEREST RATE CONTROL INTEREST RATE CONTROLS INTEREST RATE REGIMES INTEREST RATE RESTRICTIONS INTEREST RATES INTEREST RATES ON LOANS INTERNATIONAL BANK INTERNATIONAL FINANCE INVESTMENT RESOURCES LENDER LENDERS LIFE INSURANCE LOAN LOAN APPLICATIONS LOAN CONTRACT LOAN SIZE LOAN TERMS LOCAL CURRENCY LOW-INCOME LOW-INCOME BORROWERS LOW-INCOME CONSUMERS LOW-INCOME PEOPLE LOWER INTEREST RATE LOWER INTEREST RATES LOWER-INCOME HOUSEHOLDS MARKET COMPETITION MARKET FAILURE MARKET FAILURES MASS MEDIA MEDIUM ENTERPRISES MFI MFIS MICRO-ENTREPRENEURS MICROCREDIT MICROFINANCE MICROFINANCE INSTITUTIONS MICROFINANCE LOANS MONEY LENDING MONEY MANAGEMENT MONEYLENDERS MORAL HAZARD NEW MARKETS NOMINAL INTEREST RATE NOMINAL INTEREST RATES OFFICE OF FAIR TRADING OPERATIONAL COSTS OUTSTANDING BALANCE OVERDRAFTS PAYDAY LENDERS PAYDAY LOANS PERSONAL FINANCIAL INFORMATION PREDATORY LENDING PRIVATE CREDIT PROBABILITY PRODUCTIVITY REGULATORY AUTHORITY RESERVE BANK RISK MANAGEMENT SAVINGS SAVINGS ACCOUNTS SAVINGS INSTITUTIONS SAVINGS OPTIONS SHORT-TERM LENDING SMALL ENTERPRISES SMALL LOANS SOCIAL HOUSING SOURCES OF CREDIT SOURCES OF FINANCE SUPPLY OF CREDIT TOTAL COST TRANSACTION TRANSACTION COSTS TRANSPARENCY TRANSPARENCY OF INFORMATION TRUE COST TYPES OF CONSUMER UNION UNSECURED LOANS USURY USURY CEILINGS USURY LAW USURY LAWS WITHDRAWAL |
| spellingShingle |
ACCESS TO CREDIT ACCESS TO FINANCE ACCOUNTING ADMINISTRATIVE FEES ADVISORY SERVICES ANNUAL INTEREST RATE ANNUAL INTEREST RATES ANNUAL PERCENTAGE RATE APR AVAILABILITY OF CREDIT AVERAGE INTEREST AVERAGE INTEREST RATE AVERAGE INTEREST RATES BANK ACCOUNTS BANK ASSET BANK COMPETITION BANK LENDING BANK LOANS BANKING SYSTEM BANKS BOND BOND RATES BORROWING BUSINESS TRANSACTIONS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS COMMERCIAL CREDIT COMMERCIAL LENDING COMMERCIAL LOANS COMMERCIAL TRANSACTIONS CONSUMER CREDIT CONSUMER CREDITS CONSUMER FINANCIAL LITERACY CONSUMER LITERACY CONSUMER LOANS CONSUMER ORGANIZATIONS CONSUMER PROTECTION CONTRIBUTION COST OF CREDIT CREDIT BUREAU CREDIT BUREAUS CREDIT CARD CREDIT CARDS CREDIT INFORMATION CREDIT INFORMATION SYSTEMS CREDIT INSTITUTIONS CREDIT MARKET CREDIT PROVIDER CREDIT PROVIDERS CREDIT TRANSACTIONS CREDIT UNION CREDIT UNIONS CREDITOR CREDITORS CREDITS CREDITWORTHINESS CROP INSURANCE CURRENCY CURRENT ACCOUNT CURRENT INTEREST RATE DEBT DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT BANKS EDUCATED CONSUMER EDUCATIONAL LEVEL EMPLOYERS EXCESSIVE INTEREST RATES EXPLOITATION FAIR TRADING FARMERS FINANCIAL ACCESS FINANCIAL CONSUMER FINANCIAL COSTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL EDUCATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL LITERACY FINANCIAL LITERACY INITIATIVES FINANCIAL LITERACY PROGRAMS FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL MATTERS FINANCIAL POLICIES FINANCIAL PRODUCTS FINANCIAL REFORMS FINANCIAL REGULATOR FINANCIAL REGULATORS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR INDICATORS FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORM FINANCIAL SERVICES FINANCIAL SERVICES AUTHORITY FINANCIAL SERVICES INDUSTRY FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FORMAL CREDIT FORMAL FINANCIAL INSTITUTION FORMAL FINANCIAL INSTITUTIONS FORMAL LOANS GOVERNMENT POLICIES HIGH INTEREST RATE HIGH INTEREST RATES HOUSEHOLDS HOUSING LOANS INDEBTEDNESS INFORMAL FINANCIAL INSTITUTIONS INFORMATION ASYMMETRIES INPUT PRICES INSTRUMENT INTEREST RATE INTEREST RATE CAP INTEREST RATE CAPS INTEREST RATE CEILING INTEREST RATE CEILINGS INTEREST RATE CONTROL INTEREST RATE CONTROLS INTEREST RATE REGIMES INTEREST RATE RESTRICTIONS INTEREST RATES INTEREST RATES ON LOANS INTERNATIONAL BANK INTERNATIONAL FINANCE INVESTMENT RESOURCES LENDER LENDERS LIFE INSURANCE LOAN LOAN APPLICATIONS LOAN CONTRACT LOAN SIZE LOAN TERMS LOCAL CURRENCY LOW-INCOME LOW-INCOME BORROWERS LOW-INCOME CONSUMERS LOW-INCOME PEOPLE LOWER INTEREST RATE LOWER INTEREST RATES LOWER-INCOME HOUSEHOLDS MARKET COMPETITION MARKET FAILURE MARKET FAILURES MASS MEDIA MEDIUM ENTERPRISES MFI MFIS MICRO-ENTREPRENEURS MICROCREDIT MICROFINANCE MICROFINANCE INSTITUTIONS MICROFINANCE LOANS MONEY LENDING MONEY MANAGEMENT MONEYLENDERS MORAL HAZARD NEW MARKETS NOMINAL INTEREST RATE NOMINAL INTEREST RATES OFFICE OF FAIR TRADING OPERATIONAL COSTS OUTSTANDING BALANCE OVERDRAFTS PAYDAY LENDERS PAYDAY LOANS PERSONAL FINANCIAL INFORMATION PREDATORY LENDING PRIVATE CREDIT PROBABILITY PRODUCTIVITY REGULATORY AUTHORITY RESERVE BANK RISK MANAGEMENT SAVINGS SAVINGS ACCOUNTS SAVINGS INSTITUTIONS SAVINGS OPTIONS SHORT-TERM LENDING SMALL ENTERPRISES SMALL LOANS SOCIAL HOUSING SOURCES OF CREDIT SOURCES OF FINANCE SUPPLY OF CREDIT TOTAL COST TRANSACTION TRANSACTION COSTS TRANSPARENCY TRANSPARENCY OF INFORMATION TRUE COST TYPES OF CONSUMER UNION UNSECURED LOANS USURY USURY CEILINGS USURY LAW USURY LAWS WITHDRAWAL Maimbo, Samuel Munzele Henriquez Gallegos, Claudia Alejandra Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| relation |
Policy Research Working Paper;No. 7070 |
| description |
Among other common forms of government
financial control, caps on interest rates have been
declining over the past several decades as most
industrialized countries and a rising number of developing
countries continue liberalizing their financial policies.
However, in several countries the last financial crisis
reopened the debate on interest rate controls as a tool for
consumer protection. This paper undertakes a stock-taking
exercise to determine the number of countries currently
capping interest rates on loans. The paper looks at the main
characteristics of the regimes countries have used,
including the source of rate-setting authority, the
methodology, and the criteria for establishing the cap. The
paper finds at least 76 countries around the world currently
use some form of interest rate caps on loans -- all with
varying degrees of effects, including the withdrawal of
financial institutions from the poor or from specific
segments of the market, an increase in the total cost of the
loan through additional fees and commissions, among others.
The paper concludes that there are more effective ways of
reducing interest rates on loans over the long run and of
improving access to finance: measures that enhance
competition and product innovation, improve financial
consumer protection frameworks, increase financial literacy,
promote credit bureaus, enforce disclosure of interest
rates, and promote microcredit products. Such measures
should be implemented in an integrated manner. However, if
caps are still considered a useful policy tool for reducing
interest rates on loans and increasing access to finance,
they should be implemented in accord with the caveats
described in the paper. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Maimbo, Samuel Munzele Henriquez Gallegos, Claudia Alejandra |
| author_facet |
Maimbo, Samuel Munzele Henriquez Gallegos, Claudia Alejandra |
| author_sort |
Maimbo, Samuel Munzele |
| title |
Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| title_short |
Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| title_full |
Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| title_fullStr |
Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| title_full_unstemmed |
Interest Rate Caps around the World : Still Popular, but a Blunt Instrument |
| title_sort |
interest rate caps around the world : still popular, but a blunt instrument |
| publisher |
World Bank Group, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/10/20303403/interest-rate-caps-around-world-still-popular-blunt-instrument http://hdl.handle.net/10986/20494 |
| _version_ |
1764445531859320832 |
| spelling |
okr-10986-204942021-04-23T14:03:56Z Interest Rate Caps around the World : Still Popular, but a Blunt Instrument Maimbo, Samuel Munzele Henriquez Gallegos, Claudia Alejandra ACCESS TO CREDIT ACCESS TO FINANCE ACCOUNTING ADMINISTRATIVE FEES ADVISORY SERVICES ANNUAL INTEREST RATE ANNUAL INTEREST RATES ANNUAL PERCENTAGE RATE APR AVAILABILITY OF CREDIT AVERAGE INTEREST AVERAGE INTEREST RATE AVERAGE INTEREST RATES BANK ACCOUNTS BANK ASSET BANK COMPETITION BANK LENDING BANK LOANS BANKING SYSTEM BANKS BOND BOND RATES BORROWING BUSINESS TRANSACTIONS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS COMMERCIAL CREDIT COMMERCIAL LENDING COMMERCIAL LOANS COMMERCIAL TRANSACTIONS CONSUMER CREDIT CONSUMER CREDITS CONSUMER FINANCIAL LITERACY CONSUMER LITERACY CONSUMER LOANS CONSUMER ORGANIZATIONS CONSUMER PROTECTION CONTRIBUTION COST OF CREDIT CREDIT BUREAU CREDIT BUREAUS CREDIT CARD CREDIT CARDS CREDIT INFORMATION CREDIT INFORMATION SYSTEMS CREDIT INSTITUTIONS CREDIT MARKET CREDIT PROVIDER CREDIT PROVIDERS CREDIT TRANSACTIONS CREDIT UNION CREDIT UNIONS CREDITOR CREDITORS CREDITS CREDITWORTHINESS CROP INSURANCE CURRENCY CURRENT ACCOUNT CURRENT INTEREST RATE DEBT DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT BANKS EDUCATED CONSUMER EDUCATIONAL LEVEL EMPLOYERS EXCESSIVE INTEREST RATES EXPLOITATION FAIR TRADING FARMERS FINANCIAL ACCESS FINANCIAL CONSUMER FINANCIAL COSTS FINANCIAL CRISIS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL EDUCATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL LITERACY FINANCIAL LITERACY INITIATIVES FINANCIAL LITERACY PROGRAMS FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL MATTERS FINANCIAL POLICIES FINANCIAL PRODUCTS FINANCIAL REFORMS FINANCIAL REGULATOR FINANCIAL REGULATORS FINANCIAL RESOURCES FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR INDICATORS FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORM FINANCIAL SERVICES FINANCIAL SERVICES AUTHORITY FINANCIAL SERVICES INDUSTRY FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FORMAL CREDIT FORMAL FINANCIAL INSTITUTION FORMAL FINANCIAL INSTITUTIONS FORMAL LOANS GOVERNMENT POLICIES HIGH INTEREST RATE HIGH INTEREST RATES HOUSEHOLDS HOUSING LOANS INDEBTEDNESS INFORMAL FINANCIAL INSTITUTIONS INFORMATION ASYMMETRIES INPUT PRICES INSTRUMENT INTEREST RATE INTEREST RATE CAP INTEREST RATE CAPS INTEREST RATE CEILING INTEREST RATE CEILINGS INTEREST RATE CONTROL INTEREST RATE CONTROLS INTEREST RATE REGIMES INTEREST RATE RESTRICTIONS INTEREST RATES INTEREST RATES ON LOANS INTERNATIONAL BANK INTERNATIONAL FINANCE INVESTMENT RESOURCES LENDER LENDERS LIFE INSURANCE LOAN LOAN APPLICATIONS LOAN CONTRACT LOAN SIZE LOAN TERMS LOCAL CURRENCY LOW-INCOME LOW-INCOME BORROWERS LOW-INCOME CONSUMERS LOW-INCOME PEOPLE LOWER INTEREST RATE LOWER INTEREST RATES LOWER-INCOME HOUSEHOLDS MARKET COMPETITION MARKET FAILURE MARKET FAILURES MASS MEDIA MEDIUM ENTERPRISES MFI MFIS MICRO-ENTREPRENEURS MICROCREDIT MICROFINANCE MICROFINANCE INSTITUTIONS MICROFINANCE LOANS MONEY LENDING MONEY MANAGEMENT MONEYLENDERS MORAL HAZARD NEW MARKETS NOMINAL INTEREST RATE NOMINAL INTEREST RATES OFFICE OF FAIR TRADING OPERATIONAL COSTS OUTSTANDING BALANCE OVERDRAFTS PAYDAY LENDERS PAYDAY LOANS PERSONAL FINANCIAL INFORMATION PREDATORY LENDING PRIVATE CREDIT PROBABILITY PRODUCTIVITY REGULATORY AUTHORITY RESERVE BANK RISK MANAGEMENT SAVINGS SAVINGS ACCOUNTS SAVINGS INSTITUTIONS SAVINGS OPTIONS SHORT-TERM LENDING SMALL ENTERPRISES SMALL LOANS SOCIAL HOUSING SOURCES OF CREDIT SOURCES OF FINANCE SUPPLY OF CREDIT TOTAL COST TRANSACTION TRANSACTION COSTS TRANSPARENCY TRANSPARENCY OF INFORMATION TRUE COST TYPES OF CONSUMER UNION UNSECURED LOANS USURY USURY CEILINGS USURY LAW USURY LAWS WITHDRAWAL Among other common forms of government financial control, caps on interest rates have been declining over the past several decades as most industrialized countries and a rising number of developing countries continue liberalizing their financial policies. However, in several countries the last financial crisis reopened the debate on interest rate controls as a tool for consumer protection. This paper undertakes a stock-taking exercise to determine the number of countries currently capping interest rates on loans. The paper looks at the main characteristics of the regimes countries have used, including the source of rate-setting authority, the methodology, and the criteria for establishing the cap. The paper finds at least 76 countries around the world currently use some form of interest rate caps on loans -- all with varying degrees of effects, including the withdrawal of financial institutions from the poor or from specific segments of the market, an increase in the total cost of the loan through additional fees and commissions, among others. The paper concludes that there are more effective ways of reducing interest rates on loans over the long run and of improving access to finance: measures that enhance competition and product innovation, improve financial consumer protection frameworks, increase financial literacy, promote credit bureaus, enforce disclosure of interest rates, and promote microcredit products. Such measures should be implemented in an integrated manner. However, if caps are still considered a useful policy tool for reducing interest rates on loans and increasing access to finance, they should be implemented in accord with the caveats described in the paper. 2014-10-30T19:53:52Z 2014-10-30T19:53:52Z 2014-10 http://documents.worldbank.org/curated/en/2014/10/20303403/interest-rate-caps-around-world-still-popular-blunt-instrument http://hdl.handle.net/10986/20494 English en_US Policy Research Working Paper;No. 7070 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |