Impacts of the Interest Rate Ceiling on Microfinance Sector in Cambodia: Evidence from a Household Survey

Sovannroeun Samreth, Daiju Aiba, Sothearoath Oeur and Vanndy Vat

No 219, Working Papers from JICA Research Institute

Abstract: This paper examines the effects of the imposition of an interest rate ceiling in the microfinance sector in Cambodia in 2017, based on a household survey undertaken in 2019. Evidence indicates that the average interest rate was reduced after the imposition of the ceiling. Although this reduction is partially offset by the increase of the average loan assessment and processing fee, the average effective interest rate (i.e., credit cost) declined. The results also show the increase in the average loan size from formal sources at a relatively small level and the increase in the percentage of loans from informal sources by a few percentage points. Moreover, we find that relatively low-income households face a higher probability of being rejected for loans and a higher debt service ratio is positively associated with a larger loan amount. This implies the possibility of the increase of the debt burden occurring among relatively small borrowers, given that an increase of the average loan size at relatively small loan levels is observed. The evidence supporting the important role of financial literacy in reducing household debt burden is also confirmed.

Keywords: Interest rate ceiling; Financial inclusion; Microfinance; Cambodia (search for similar items in EconPapers)
Date: 2021-03-16
New Economics Papers: this item is included in nep-ban, nep-dev, nep-fle, nep-mfd and nep-sea
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://doi.org/10.18884/00001043 (text/html)
https://jicari.repo.nii.ac.jp/?action=repository_u ... file_id=22&file_no=1 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jic:wpaper:219

Access Statistics for this paper

More papers in Working Papers from JICA Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by Japan International Cooperation Agency Library ().