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Effects of interest rate caps on microcredit: evidence from a natural experiment in Bolivia

María José Roa (), Alejandra Villegas () and Ignacio Garrón ()
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María José Roa: Investigadora del Instituto de Investigaciones Económicas y Sociales Francisco de Vitoria
Alejandra Villegas: Investigadora de Universidad Iberoamericana Ciudad de México
Ignacio Garrón: Consultor indpendiente

Authors registered in the RePEc Author Service: María José Roa García ()

No 03/2020, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: This paper evaluates the imposition of caps on microcredit lending rates through directed credit policies for productive sectors. This financial inclusion intervention provides a unique quasi-experiment, allowing to estimate its causal 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 SMEs granted by MFIs. Particularly, we find robust results indicating that 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.

Keywords: Interest rate ceilings; financial inclusion; credit access; microcredit loans; small and medium enterprises loans . (search for similar items in EconPapers)
JEL-codes: G18 G28 G38 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2020-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn, nep-dev, nep-ent, nep-fdg, nep-fle, nep-isf, nep-mfd and nep-sbm
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