Alternative methods of reducing interest rate spreads

[veritas]

• Tweet

However to truly bring
down interest rates sustainably, governments need to build a business and regulatory environment and
support structures that encourage the supply of financial services at lower cost and hence push the supply
curve to the right. (p. 10)

https://assets.publishing.service.gov.uk/media/57a08a0de5274a31e00003d0/Interest_rate_caps_and_their_impact_on_financial_inclusion.pdf

[veritas]

However, although there are undoubtedly market failures in credit markets, and government does have a
role in managing these market failures (and indeed supporting certain sectors), interest rate caps are
ultimately an inefficient way of reaching the goal of lower long term interest rates. This is because they
address the symptom, not the cause of financial market failures. In order to bring down rates sustainably,
it is likely that governments will need to act more systemically, addressing issues in market information
and market structure and on the demand side and ultimately supporting a deeper level of financial sector
reform. (p. 12)

https://assets.publishing.service.gov.uk/media/57a08a0de5274a31e00003d0/Interest_rate_caps_and_their_impact_on_financial_inclusion.pdf