Interest Rate Ceilings and Microfinance: The Story So Far

September, 2004     Brigit Helms, Xavier Reille

This paper outlines the rationale for high microcredit interest rates and the impact of interest rate ceilings on microfinance clients. The authors recommend an approach to lowering microcredit interest rates through competition and consumer protection, rather than imposing interest rate ceilings. Policies to promote competition, combined with relevant consumer protection measures, can go a long way toward expanding the reach of microcredit while safeguarding consumer interests.