Impact of the New Financial Services Law in Bolivia on Financial Stability and Inclusion
32 Pages Posted: 17 Feb 2016
Date Written: December 2015
Abstract
This paper examines the impact of the new financial services law in Bolivia-including credit quotas and interest rate caps-on financial stability and inclusion. So far, credit to 'targeted' sectors is growing as intended by the law but the increase in the average loan size of microfinance institutions and the declining number of borrowers point to potentially adverse effects of the interest rate caps on financial inclusion. Looking ahead, while the new law contains many good provisions, international experience suggests that promoting financial access through credit quota and interest rate caps is very challenging. Indeed, trying to meet the 2018 credit target for the productive sectors and social housing could imply the build up of significant financial stability risks. These will need careful monitoring and possible modifications to the credit quotas and interest rate caps.
Keywords: Financial Development, Financial Inclusion, credit, interest, interest rate, borrowers, financial services, Government Policy and Regulation, Enterprise Policy,
JEL Classification: G21, G28, L53, O21
Suggested Citation: Suggested Citation