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Started by : Sukhendu Ghosh, Investment Advisor, Standard Chartered   09 25 2008 11:13:03 +0000
Industry : Private Banking/Wealth ManagementFunctional Area : Getting Started(Entrepreneurship)
Activity:  6 views;  last activity : 07 06 2010 20:18:09 +0000

What is the impact of interest rate ceilings on poor customers?

 
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1 Limited Access to Credit
2 Less Transparency on the Cost of Credit

Limited Access to Credit

idea posted by Sukhendu Ghosh Investment Advisor, Standard Chartered
When faced with an interest rate ceiling, MFIs will often retreat from the market, grow more slowly, and/or reduce their work in rural areas or other, more costly market segments because they cannot cover their operating costs.  Similarly, interest ceilings discourage commercial banks from expanding into higher-cost rural or microcredit markets.
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Less Transparency on the Cost of Credit

idea posted by Bikash Bhattacharyya Investment Advisor, Kotak Mahindra
MFIs subjected to interest rate ceilings have tried to cover their costs by imposing new charges and fees. Customers do not always clearly understand that these fees are part of the loan cost. This lack of transparency hurts the poor by undermining their ability to comparison shop for loans. 
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Great insight Beena,,,thanks for sharing.
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