The recent introduction of a lending rate ceiling for banks and other
financial institutions in Zambia reopened an old debate over the
appropriateness of regulatory intervention to limit the charging of
rates that are deemed, by policymakers, to be excessively high. This
short paper studies the theory behind interest rate caps and aims to
answer the following questions:
- Where are interest rate caps currently used, and where have they been
- What have been the impacts of interest rate caps, particularly on
expanding access to financial services?
- What are the alternatives to interest rate caps in reducing spreads in
Miller, H. Interest rate caps and their impact on financial inclusion. (2013) 17 pp.