scholarly journals The Impact of Interest Rate Ceilings on Microfinance Industry

2015 ◽  
Vol 2 (2) ◽  
pp. 10
Author(s):  
Ali Saleh Alshebami ◽  
D. M. Khandare
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Secondary Data ◽  
Research Subject ◽  
Access To Credit ◽  
The Poor ◽  
Good Intention ◽  
The Interest Rate ◽  
The Impact

<p>Imposing ceilings on the interest rate has recently become one of the new hottest topics in microfinance industry; various debates have been discussing this issue to know the effect of interest rate ceilings on the supply of credit in particular and on microfinance industry in general. However in spite of the good intention behind these ceilings, there was no absolute result stating that ceilings have really contributed to the improvement or protection of the poor clients, indeed, these ceilings have hurt those low income people instead of helping them, due to these ceilings most of MFIs left the market or reduced their scale due to the inability to continue operating with low interest rate leaving the very poor clients without access to credit. Thus, the purpose of this paper is to review the impact of imposing such ceilings on the interest rates and to find out what alterative solutions can be employed as substitutes for them. This paper is entirely based on the secondary data collected from various records related to microfinance such as microfinance books, official websites and reports, published papers, and other sources related to the research subject.</p>

Microfinance and credit to the ultra poor

2014 ◽  
Vol 41 (10) ◽  
pp. 975-993 ◽  
Author(s):  
Arghya Kusum Mukherjee
Keyword(s):  
Interest Rate ◽  
Secondary Data ◽  
Analytical Framework ◽  
Implicit Assumption ◽  
Content Type ◽  
Access To Credit ◽  
The Poor ◽  
The Interest Rate ◽  
The Cost

Purpose – The purpose of this paper is to see whether Government of India is successful to make credit accessible to the poor; to examine the role of competition in microfinance sector in ensuring credit to the ultra poor borrowers; to see the role of subsidy in microfinance movement. Design/methodology/approach – The paper is based on secondary data. This paper examines, in an analytical framework with a variety of assumptions, the role of microfinance institutes (MFIs) in bringing capital to the ultra poor. Findings – In an attempt to make credit accessible to the poor, Government of India took several measures, but did not succeed to a significant extent. This paper has shown that the microcredit has become accessible to the “working poor,” but not to the ultra poor. Initially the model shows that in the absence of competition MFI and moneylender are equally exploitative to the ultra poor borrowers. The model further shows that in the presence or absence of competition in the credit market, credit may be accessible to the ultra poor borrowers under certain conditions. Excessive subsidies might drive out the poor borrowers from the microfinance sector. Originality/value – For the poor clients served by the microfinance institution, the argument goes, the access not the cost (interest rate) that matters (Robinson, 2001). Here the implicit assumption is that the interest rate elasticity of demand for micro credit is close to zero (Emran et al., 2006). In an interesting paper Deheja et al. (2005) has shown that the interest rate elasticity of loan in the microfinance system is significantly negative. The author is of the opinion that this is the cost of credit as well as inability to pay a minimum price of credit, which denies the access to credit.

scholarly journals Interest Rates Capping and Performance of Selected Small and Medium Restaurants in Nairobi West, Nairobi City County, Kenya

2020 ◽  
Vol 2 (3) ◽  
pp. 61-73
Author(s):  
Jane Nganga ◽  
Gerald Atheru
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Empirical Studies ◽  
Secondary Data ◽  
Primary Data ◽  
Economic Sectors ◽  
Access To Credit ◽  
And Performance ◽  
Medium Businesses ◽  
The Impact

The use of interest rate capping as a way of controlling various economic sectors has highly contributed to a continuous decline in the growth of credit to the small and medium businesses and private entities by introducing a distortion in the market which the credit markets have not been able to recover from. This has resulted to the issues of reduced income, high borrowing risks and a high emerging rate of shylocks who are also perceived to have high interest rates. Based on the provided evidence the caps on loan have highly discouraged most of the SMEs from seeking for growth funds. Empirical studies done have found mixed results on the impacts of interest capping on the SMEs performance thus a research gap. The research aimed at filling the current gap by focusing on a research on establishing the impacts of interest rates capping on the performance of small and medium restaurants in Kenya, within Nairobi County. The research was guided by objectives which include; determining the effect of the interest rate capping on the enterprises’ performance, determining the impact of credit accessibility of the enterprise’s performance, assessing the effect of credit availability on the enterprise’s performance. The research was anchored on liquidity and classical models as well as on the theory of credit market. The research will adopt a descriptive research design. The study population was 312 employees. A census was adopted. The study used both primary and secondary data. Primary data was collected using semi-structured questionnaires while secondary data was obtained from the financial statements of the enterprises. The research further employed questionnaires that were administered to each participant. The study used both the quantitative and qualitative methods of collecting data. The collected data was analyzed using descriptive and inferential statistics like frequency, mean, percentages and standard deviations and be presented using charts, tables and graphs. The study also conducted a multiple regression analysis to establish the relationship between the study variables .The understandings will ensure that they are not charged excessive interest rates for their loans. The study concluded that interest rate capping generally had a positive relationship with the performance of small and medium sized restaurants in Nairobi West. The study concluded that credit accessibility among the small and medium restaurants was based on firm characteristics and capacity and enhanced adjustment to adverse environmental shocks, raised amount of product investment and eliminates financial constraints to a great extent. It was concluded that the education level and experience of the respondents, awareness level, firm size and availability of collateral. The study concluded further that the risks associated with repaying, operating environment, status and ownership structure influenced performance of the SMEs since it determined their potential to get credit from the banks and other lenders. The study recommended that the banks and other lenders in the financial sector should enhance timely access to credit at affordable and flexible rates to enhance firm performance. It was further recommended that the SMEs need to improve awareness on existence of credit, willingness of MFIs and banks to offer credit to enhance SME thriving.  The study recommended that the number of lenders available in the market, willing to extent credit and creating awareness of products need to increase to spread choice, reduce rate and improve access and availability of credit to SMEs.

DETERMINAN INFLASI DI INDONESIA PERIODE 1980-2015

2016 ◽  
Vol 21 (1) ◽  
pp. 1-7
Author(s):  
Risna Risna
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Spending ◽  
Positive Impact ◽  
Secondary Data ◽  
Quantitative Approach ◽  
State Spending ◽  
Factors Affecting ◽  
The Interest Rate

This study aims to determine the effect of government spending, the money supply, the interest rate of Bank Indonesia against inflation.This study uses secondary data. Secondary data were obtained directly from the Central Bureau of Statistics and Bank Indonesia. It can be said that there are factors affecting inflationas government spending, money supply, and interest rates BI. The reseach uses a quantitative approach to methods of e-views in the data. The results of analysis of three variables show that state spending significantand positive impact on inflationin Indonesia, the money supply significantand negative to inflationin Indonesia, BI rate a significantand positive impact on inflation in Indonesia

scholarly journals Pengaruh Tingkat Suku Bunga, Inflasi Dan Nilai Kurs Terhadap Harga Saham Perusahaan Perhotelan Yang Terdaftar Di Bursa Efek Indonesia Per Triwulannya Periode 2016-2018

2021 ◽  
Vol 4 (2) ◽  
pp. 871-877
Author(s):  
Rahmat Dewa Bagas Nugraha ◽  
H.M Nursito
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Quantitative Study ◽  
Stock Prices ◽  
Stock Exchange ◽  
Secondary Data ◽  
Ratio Analysis ◽  
The Interest Rate

This study aims to determine and analyze the factors that affect stock prices through appropriate ratio analysis. As for the ratio of interest rates, inflation and exchange rates. Researchers want to know and analyze the effect partially or simultaneously between interest rates, inflation, and exchange rates on stock prices. This research is a quantitative study using secondary data. The object of this research is hotel companies listed on the Indonesia Stock Exchange for the period 2016-2018. The sample used in this study were 3 hotel with certain characteristics. The results of research simultaneously using the F test show that there is no influence between interest rates, inflation and exchange rates on stock prices because the calculated value is smaller than the table. Partially with the t test it can be concluded that there is no influence between interest rates on stock prices because the tcount value in the interest rate variable is smaller than the t table. Likewise, the t calculation of inflation and the exchange rate is smaller than the t table, so that there is no partial effect of the two variables on stock prices. Keywords: Stock Prices, Interest Rates, Inflation and Exchange Rates

scholarly journals The Ability of Selected European Countries to Face the Impending Economic Crisis Caused by COVID-19 in the Context of the Global Economic Crisis of 2008

2020 ◽  
Vol 13 (8) ◽  
pp. 179
Author(s):  
Róbert Oravský ◽  
Peter Tóth ◽  
Anna Bánociová
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Economic Crisis ◽  
Economic Effects ◽  
European Countries ◽  
Consumer Confidence ◽  
Negative Consequences ◽  
Confidence Index ◽  
The Interest Rate ◽  
The Impact

This paper is devoted to the ability of selected European countries to face the potential economic crisis caused by COVID-19. Just as other pandemics in the past (e.g., SARS, Spanish influenza, etc.) have had negative economic effects on countries, the current COVID-19 pandemic is causing the beginning of another economic crisis where countries need to take measures to mitigate the economic effects. In our analysis, we focus on the impact of selected indicators on the GDP of European countries using a linear panel regression to identify significant indicators to set appropriate policies to eliminate potential negative consequences on economic growth due to the current recession. The European countries are divided into four groups according to the measures they took in the fiscal consolidation of the last economic crisis of 2008. In the analysis, we observed how the economic crisis influences GDP, country indebtedness, deficit, tax collection, interest rates, and the consumer confidence index. Our findings include that corporate income tax recorded the biggest decline among other tax collections. The interest rate grew in the group of countries most at risk from the economic crisis, while the interest rate fell in the group of countries that seemed to be safe for investors. The consumer confidence index can be considered interesting, as it fell sharply in the group of countries affected only minimally by the crisis (Switzerland, Finland).

2016 Poverty Reduction and Growth Trust - Review of Interest Rate Structure

Policy Papers ◽  
2016 ◽  
Vol 2016 (50) ◽  
Author(s):  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Poverty Reduction ◽  
Low Income Countries ◽  
Credit Facility ◽  
Rate Structure ◽  
Low Interest Rates ◽  
The Interest Rate ◽  
Rate Mechanism

This paper reviews the interest rate structure that would apply to the PRGT in 2017–18. Based on the interest rate setting mechanism agreed in 2009, the interest rate for the Extended Credit Facility (ECF) would be zero and the rate for the Standby Credit Facility (SCF) would be 0.25 percent. The interest rate for the Rapid Credit Facility (RCF) was set permanently at zero in July 2015. Since the current mechanism was agreed, the Executive Board has granted successive exceptional interest waivers on all outstanding Fund concessional credit, setting all interest rates charged at zero percent. These waivers have been extended three times, providing interest rate relief to many low-income countries at a time when they faced considerable headwinds from the global economic environment. A strong case remains for maintaining zero rates on Fund concessional credit at the current global economic juncture. The global outlook for LICs has not significantly improved since the last review and downside risks remain significant. At the same time, many Directors noted at the last review in 2014 that the possibility of a prolonged period of very low interest rates warrants an early re-examination of the mechanism, including an exit strategy from repeated application of the waiver, with the objective of safeguarding the self-sustaining capacity of the PRGT. The paper seeks to respond to this call. It proposes that the PRGT interest rate mechanism be amended to accommodate anomalies created by a prolonged period of very low interest rates. Specifically, a new threshold is proposed whereby both the ECF and the SCF rate would be set at zero when the 12-month average SDR rate is less than or equal to 0.75 percent. This proposal will likely keep all PRGT interest rates under the mechanism at zero through at least 2020 given current market expectations while incurring only minimal subsidy costs and eliminating the need for continual waivers. In addition, staff proposes to waive interest rate charges on outstanding legacy balances under the Exogenous Shocks Facility (ESF), which are not determined via the interest rate mechanism, until the next review.

On the Judicial Interest Rate: Towards a Law and Economic Theory

2013 ◽  
Vol 4 (1) ◽  
pp. 34-62
Author(s):  
Hugo A Acciarri ◽  
Nuno Garoupa
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Law And Economics ◽  
Policy Instruments ◽  
Institutional Settings ◽  
Rules Of Procedure ◽  
The Interest Rate ◽  
Substantive Law ◽  
The Impact ◽  
Neutral Effect

AbstractWhile all legal systems implement a form of pre-judgment or post-judgment interest, there is a dearth of literature on substantive law and economics analysing the impact, functioning, and assessment of the judicial interest rate. Current legal scholarship typically views the interest rate as having a neutral effect on private and social costs. This paper demonstrates that the issue is theoretically far more complex and largely influential in legal policy. Due to the asymmetric opportunity costs for each party in a case, judicial interest rates may lead to improper delay of proceedings or the decoupling of damages from recovery. These potential results influence the number of settlements and suits. On this ground, we compare different institutional settings from an economic perspective and conclude that the appropriate mechanism depends on the alternative policy instruments available, namely, the rules of procedure, court fees, or mechanisms for appropriately setting damages. Further, we argue that abolishing the statute which sets pre-judgment interest may be a proposal worth considering.

scholarly journals A Tax-Based Estimate of the Elasticity of Intertemporal Substitution

2013 ◽  
Vol 03 (01) ◽  
pp. 1350001 ◽  
Author(s):  
Jonathan Gruber
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Interest Rates ◽  
Consumer Expenditure ◽  
Intertemporal Substitution ◽  
Tax Rate ◽  
Elasticity Of Intertemporal Substitution ◽  
Using Data ◽  
The Interest Rate ◽  
The Impact

One of the most important behavioral parameters in macroeconomics is the elasticity of intertemporal substitution (EIS). Starting with the seminal work of Hall (Hall, R., 1978, Stochastic Implications of the Life Cycle — Permanent Income Hypothesis: Theory and Evidence, Journal of Political Economy 86, 971–987), researchers have used an Euler equation framework to estimate the EIS, relating the growth rate of consumption to the after-tax interest rate facing consumers. This large literature has, however, produced very mixed results, perhaps due to an important limitation: The impact of the interest rate on consumption or savings is identified by time-series movements in interest rates. Yet the factors that cause time-series movements in interest rates may themselves be correlated with consumption or savings decisions. I address this problem by using variation across individuals in the capital income tax rate. Conditional on observable characteristics of individuals, tax rate movements cause exogenous shifts in the after-tax interest rate. Using data on total non-durable consumption from the Consumer Expenditure Survey over two decades, I estimate a surprisingly high EIS of two. This finding is robust to a variety of specification checks.

scholarly journals Determinan Suku Bunga dan Likuiditas Bank Terhadap Pertumbuhan Kredit di Indonesia

Jurnal Ecogen ◽  
2020 ◽  
Vol 3 (2) ◽  
pp. 200
Author(s):  
Yeniwati Yeniwati
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Secondary Data ◽  
Least Square ◽  
Bank Credit ◽  
Credit Growth ◽  
Ordinary Least Square ◽  
Banking Community ◽  
The Interest Rate

This study aims to determine the effect of the interest rate (BI rate) on bank credit growth in Indonesia, liquidity on bank credit growth in Indonesia and determine the effect of interest rates and liquidity on bank credit growth in Indonesia. The method used in this study is Ordinary Least Square (OLS) using secondary data from 2009 Quarter I to 2018 Quarter IV. The results of the analysis showed that there was an influence between interest rates on bank credit growth in Indonesia, there was an influence between liquidity on bank credit growth in Indonesia. Together there is an influence between interest rates and bank liquidity on the growth of bank credit in Indonesia. The policy implication of this research is that Bank Indonesia must maintain the benchmark interest rate set in order to trigger an increase in bank credit growth. In addition, Bank Indonesia must monitor the liquidity of commercial banks in Indonesia so that the trust of the banking community is even greaterKeywords : interest rate, Liquidity, Credit

scholarly journals Inflation Instability Impact on Interest Rate in Egypt: Augmented Fisher Hypothesis Test

2017 ◽  
Vol 5 (1) ◽  
pp. 1 ◽  
Author(s):  
Doaa Akl Ahmed ◽  
Mamdouh Abdelmoula M. Abdelsalam
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Negative Impact ◽  
Hypothesis Test ◽  
Portfolio Theory ◽  
Expected Inflation ◽  
Fisher Hypothesis ◽  
The Interest Rate ◽  
The Impact ◽  
Autoregressive Conditional Heteroscedasticity

The paper aims at examining an augmented version of Fisher hypothesis that include inflation instability. According to this hypothesis, there is a positive relation between interest rates and expected inflation. In contrast, there is a debate regarding the impact of inflation uncertainty on interest rate. According to the portfolio theory and models of asset pricing, inflation instability positively affects the interest rate. The reason is that risk-averse investors must be compensated with higher returns for higher risks. In contrast, the loanable funds theory implies a negative impact of inflation instability and interest rates since high uncertainty leads consumers to protect themselves against inflation by raising their savings which lowers consumption and interest rates. To compute inflation volatility, we applied different Autoregressive Conditional Heteroscedasticity models. The simple and augmented versions of Fisher hypothesis are examined using Markov Switch Model to account for possible regime shift in that relationship. For the original Fisher hypothesis, there is an evidence of supporting it in the first regime while that hypothesis does not hold in the second one. In the augmented version of Fisher hypothesis, portfolio theory hypothesis is verified in the first regime whereas the loanable funds hypothesis is confirmed in the second one.

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