Interest rate restrictions and deposit opportunities for small savers in developing countries: An analytical view
- 1 October 1986
- journal article
- research article
- Published by Taylor & Francis in The Journal of Development Studies
- Vol. 23 (1) , 77-92
- https://doi.org/10.1080/00220388608422020
Abstract
This article argues that by forcing financial intermediaries (FI) to substitute implicit interest for monetary interest payments, deposit rate ceilings may increase the cost of savings mobilisation, especially from non‐wealthy households. This mechanism may partially explain the lack of small savers’ deposit opportunities in developing countries. A simple model is used to elucidate this mechanism, as well as the effects of financial technology, intensity of competition, and external funding on an FI's savings mobilisation operations.Keywords
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