## Do Interest Rate Controls Work? Evidence from Kenya

_IMF Working Papers, May 31, 2019_

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## Bibliographic details
- Authors: Emre Alper, Benedict J. Clements, Niko A Hobdari, Rafel Moyà Porcel
- Published: May 31, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498313957.001

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### Overview
- This paper reviews the impact of interest rate controls in Kenya, introduced in September 2016.
- Intent of the controls: to reduce the cost of borrowing, expand access to credit, and increase the return on savings.
- Conclusion summary: the law on interest rate controls has had the opposite effect of what was intended.

### Key findings
- The law led to a collapse of credit to micro, small, and medium enterprises.
- The law caused shrinking of the loan book of the small banks.
- The law resulted in reduced financial intermediation.
- Interest rate caps reduced the signaling effects of monetary policy.

### Policy implications and recommendations
- The paper suggests:
  - (i) the adverse effects could largely be avoided if the ceiling was high enough to facilitate lending to higher risk borrowers; and
  - (ii) alternative policies could be preferable to address concerns about the high cost of credit.

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2019/05/31/do-interest-rate-controls-work-evidence-from-kenya-46877_