The effects of interest rate caps on formal credit in Peru: evidence from a difference-in-differences analysis using SBS (2016-2022) and ENAHO (2018-2022) data
DOI:
https://doi.org/10.26439/pjm2026.n004.9190Keywords:
interest rate caps, credit rationing, difference-in-differences, financial inclusion, PeruAbstract
Objective: To evaluate the effects of Law No. 31143, which established caps on lending interest rates in the Peruvian financial system, on formal credit, considering credit supply and, complementarily, households’ access to formal housing credit. Methodology: A Difference-in-Differences (DiD) design was applied using administrative data from the Superintendency of Banking, Insurance and Private Pension Funds (SBS) for 2016–2022, adjusted to remove the effects of the Reactiva Perú program, and microdata from the National Household Survey (ENAHO) for 2018, 2019, and 2022. Results: No statistically significant effects were found on the number of borrowers or the average outstanding balance, with results remaining consistent across alternative specifications. No robust evidence of exclusion from formal credit was found; however, the rejection of the parallel trends assumption limits causal interpretation. Confidence intervals rule out a contraction in the average balance per borrower greater than 15.6%, although they do not provide informative bounds for aggregate balances. Moreover, the cap was binding for only 2.9% of the regulated balance, which helps explain the null results. Originality/value: The study distinguishes between borrower exclusion (extensive margin) and reductions in the average amount granted (intensive margin), integrating administrative data and household microdata to examine credit supply and demand. Practical implications: The findings suggest that the regulation should be assessed using multiple indicators and data sources, considering the identified limitations in causal identification. Social implications: The study contributes evidence to the debate on interest rate caps, financial inclusion, and households’ access to formal credit, providing useful insights for public policy formulation.
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