Impact of the New Financial Services Law in Bolivia on Financial Stability and Inclusion

32 Pages Posted: 17 Feb 2016

See all articles by Dyna Heng

Dyna Heng

International Monetary Fund (IMF)

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

Heng, Dyna, Impact of the New Financial Services Law in Bolivia on Financial Stability and Inclusion (December 2015). IMF Working Paper No. 15/267, Available at SSRN: https://ssrn.com/abstract=2733576

Dyna Heng (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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