Taming Predatory Lending for a Resilient Financial System and Economic Growth

Abstract

Key Messages

• Pricing for risk by financial institutions, and charging higher interest rates to more risky borrowers is not necessarily bad for the economy.
• A more competitive formal financial system will keep bank interest rates low.
• Tame predatory lending by imposing regulations that protect poor borrowers.
• Consider social protection to aid the very poor and vulnerable. Credit/loans may cause more harm to them.