In the debate on access to credit, the interest rate often occupies a central place. The logic appears straightforward: if credit becomes cheaper, more individuals and businesses will be able to access it. In Bolivia, this view has directly influenced the design of the financial regulatory framework, particularly since the enactment of Financial Services Law No. 393 and its subsequent regulation. However, both the evidence and local experience suggest that the relationship between interest rates and access to credit is not necessarily direct and is more complex than commonly assumed. In this sense, the relevant question is not whether interest rates matter, but whether they are the most effective variable when the objective is to expand access to credit in a sustainable manner, without generating adverse effects on financial intermediation.
From an economic theory perspective, the effectiveness of a price-based intervention depends on the elasticity of demand. If credit demand were highly sensitive to interest rates, reductions in the price of credit should translate into significant increases in loan volumes. However, evidence shows that in segments such as small entrepreneurs and producers, credit demand tends to be relatively price inelastic (Karlan & Zinman, 2010a; Dehejia, Montgomery & Morduch, 2012)[1].
In this context, credit primarily serves liquidity, operational continuity, and shock-management functions, rather than marginal investment decisions that are highly sensitive to moderate variations in interest rates. Factors such as urgency of need, income stability, trust in the lending institution, and the availability of alternatives often weigh more heavily than financial cost in borrowing decisions.
This pattern is particularly relevant for Bolivia. According to data from the Bolivian Financial System Supervisory Authority (ASFI, 2023, 2024), a significant portion of credit granted to smaller productive units is allocated to working capital and short production cycles. In this context, reducing interest rates does not necessarily eliminate access constraints if deeper structural barriers persist.
Barriers to Credit Access: Beyond Price
The financial inclusion literature consistently shows that the main barriers to credit access are not exclusively price-related. Collateral requirements, income informality, lack of credit history, transaction costs, and poorly adapted product design often play a more decisive role than the nominal interest rate applied (Beck & Demirgüç-Kunt, 2006; World Bank, 2014).
In Bolivia, these barriers are reinforced by structurally high levels of informality. A study published by UDAPE (2022) shows that a significant proportion of productive units operate informally, limiting their ability to meet the traditional requirements of the financial system. For these actors, the issue is not necessarily how much credit costs, but whether they can access it under conditions compatible with their productive, operational, and legal conditions.
From the perspective of financial institutions, the interest rate is not merely a price but also a risk management tool. When this variable is restricted without addressing the underlying determinants of credit risk, institutions tend to adjust through other mechanisms: reducing loan amounts and maturities, tightening eligibility requirements, or concentrating on lower-risk segments (Cull, Demirgüç-Kunt & Morduch, 2018).
Experience shows that interest rate controls may end up excluding precisely the segments they aim to protect, without necessarily reducing the effective cost of credit for those who manage to obtain it (Maimbo & Gallegos, 2014). In Bolivia, where the microfinance system plays a central role in productive financing, this effect is particularly relevant and deserves careful evaluation.
Another frequently underestimated element in the debate on credit access is the existence of informal financing markets. When formal credit is inaccessible or insufficient, households and small entrepreneurs do not stop demanding financing; instead, they turn to informal lenders, relatives, or unregulated financiers, generally at significantly higher costs (Collins et al., 2009; Banerjee & Duflo, 2011).
In Bolivia, this phenomenon not only exists but is widely recognized and used. Informal lenders offer immediate liquidity, speed, and the absence of formal requirements, advantages that often come with high interest rates, rigid repayment schemes, and increased risks of over-indebtedness. From a policy perspective, restrictions on the supply of formal credit that leave the real determinants of risk untouched tend to expand these informal markets, shifting the cost of adjustment toward more vulnerable segments (Maimbo & Gallegos, 2014). In other words, controlling the price of credit without reducing underlying risk does not eliminate exclusion; it redistributes it.
Which Variables Deserve Greater Attention?
If the objective is to effectively facilitate access to credit, the evidence suggests that there are potentially more relevant and less distortive variables than direct control of interest rates. These include strengthening credit information systems, designing guarantee schemes adapted to non-traditional assets, reducing operational costs through process innovation, and developing more flexible financial products (Demirgüç-Kunt et al., 2018; CGAP, 2019).
In the Bolivian case, where proximity and local knowledge have historically been advantages of the microfinance sector, policies aimed at strengthening these capacities could generate more significant impacts on credit access than interventions focused exclusively on price.
Additionally, if the goal is sustained and sustainable financial inclusion, policy attention should shift toward reducing structural costs, strengthening institutional efficiency, promoting more flexible and dynamic regulatory frameworks, ensuring effective competition, and creating enabling conditions for innovation.
Rethinking the Tone of the Debate
Recognizing these dynamics does not imply downplaying the importance of interest rates or denying their impact on financial users. Rather, it means acknowledging that in contexts such as Bolivia, characterized by high liquidity needs and the permanent presence of informal alternatives, access to credit depends less on price and more on the capacity of the formal financial system to offer available, reliable, and sustainable products. When that system fails to fulfill this role, the market does not contract; it reconfigures itself.
In this scenario, credit access policies that fail to explicitly consider the interaction between formal and informal credit risk tend to generate regressive effects, shifting adjustment costs to more vulnerable segments. Likewise, interventions that overlook the sustainability of financial institutions and the underlying determinants of risk tend to weaken the system’s ability to intermediate responsibly and sustainably.
Ultimately, evidence suggests that credit demand persists even when prices rise. The central issue is not only how much credit costs, but whether it exists and whether it is available when needed. If the formal system does not respond, the informal one will and typically under less favorable conditions for the end user. Therefore, focusing exclusively on interest rate controls does not guarantee greater access; an effective, long-term strategy requires acting on variables beyond price, capable of expanding access without distorting risk assessment and management.
[1] Other studies focused on the price elasticity of credit demand may also be consulted. Karlan & Zinman (2008, 2010b) conclude that access is more conditioned by eligibility, liquidity, and urgency than by price. Attanasio et al. (2015) find that changes in the cost of credit have limited effects on the uptake of productive loans, and that larger impacts are achieved through product design and the provision of support or specialized technical assistance. Similarly, Gropp, Scholz & White (1997) find limited elasticity even in developed markets. Cull, Demirgüç-Kunt & Morduch (2018) review more than a dozen studies and conclude that the price of credit matters less than access, convenience, and reliability. Finally, other studies reveal very low price elasticity and show that poor households take loans at extremely high implicit rates (Collins et al., 2009).
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