2021 Fiscal Year Research-status Report
Research on the Factors Driving Financial Over-Indebtedness and the Impacts of the Interest Rate Ceiling on the Microfinance Sector: The Cambodian Case and International Comparison Analysis
| Project/Area Number |
18K01604
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| Research Institution | Saitama University |
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Principal Investigator |
サムレト ソワンルン 埼玉大学, 人文社会科学研究科, 准教授 (90614371)
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| Project Period (FY) |
2018-04-01 – 2023-03-31
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| Keywords | Interest rate ceiling / Microfinance |
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| Outline of Annual Research Achievements |
This research examines the impacts of the imposition of an interest rate ceiling in the microfinance sector in Cambodia. To enrich our insights into the impacts, during FY2021, we conducted a review of studies on other countries. Like Cambodia, to protect borrowers, the legal maximum interest rate has been adopted by both developed and developing countries. However, the adoption of the ceiling can affect various aspects of the financial sector.
Many studies of other countries indicate the negative impacts of the interest rate ceiling on credit supply, financial inclusion, etc., especially among relatively small-sized borrowers. For Cambodia, some previous studies indicate that the ceiling led to an increase in the average loan size and a change of microfinance institutions (MFIs)’ lending behaviors toward wealthier borrowers. Furthermore, they find that the average effective interest rate may not decrease, because lower interest rates resulting from a ceiling are offset by higher loan assessment and processing fees. These results are consistent with those of our examination based on a recent household survey in terms of the increase of the average loan size and the change in the lending behaviors of MFIs. However, our study finds the decrease of the average effective interest rate of microfinance loans after the imposition of the ceiling.
During FY2021, we also conduct an analysis on the determinants of the interest rates of microfinance loans. Furthermore, research activities related to the impacts of the COVID-19 pandemic in Cambodia were also implemented.
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| Current Status of Research Progress |
Current Status of Research Progress
3: Progress in research has been slightly delayed.
Reason
The research activities for FY2021 include a survey of studies on other countries that have also imposed an interest rate ceiling for microfinance or banking sector loans for a comparative analysis. This was accomplished to some extent. However, during FY2021, due to the COVID-19 pandemic, various planned research conferences were cancelled or postponed. Thus, opportunities for disseminating research findings and exchanging ideas with other researchers and experts were limited.
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| Strategy for Future Research Activity |
During FY2022, the planned activities include a more thorough review of studies on other countries that have also imposed an interest rate ceiling for a comparative study. For more insightful analysis, field research trips and conference participation are planned to disseminate the overall research outcomes and exchange ideas with other researchers and experts. Research collaboration with Cambodian and other related institutions is also in our consideration.
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| Causes of Carryover |
During FY2021, due to the COVID-19 pandemic, field research trips were not safely possible, and various related research conferences were cancelled or postponed. Consequently, travel costs were not spent. In FY2022, to enrich our insights into the impacts of the imposition of the interest rate ceiling on the financial sector, field research trips and research conference participation will be considered. The amount incurred from FY2021 will be used for such activities.
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