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Another "French paradox": explaining why interest rates to microenterprises dit not increase with the change in French usury legislation

Author

Listed:
  • Arvind Ashta

    (Chaire Banque Populaire en Microfinance du Groupe ESC Dijon Bourgogne [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC), CEREN - CEREN, Centre de Recherche sur l'ENtreprise [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))

  • Laurence Attuel-Mendes

    (CEREN - CEREN, Centre de Recherche sur l'ENtreprise [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC), Chaire Banque Populaire en Microfinance du Groupe ESC Dijon Bourgogne [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))

  • Zaka Ratsimalahelo

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

Abstract

Conventional wisdom indicates that the growth of credit may not materialize if credit rates remain capped by usury laws, as had long been the case in France. France therefore abolished usury ceilings on loans to microenterprise in an effort to increase financing for microentrepreneurs. This should have led to an increase in interest rates and increase in microcredit. However, we do not find any increase in interest rates and this is therefore a paradox. The paper provides a brief literature review and the salient features of the legislative changes in France. It follows this up with a presentation of interest rate movements. The discussion of possible explanations of the paradox includes classical market analysis (global interest rates, money supply, and competition), behavioral and institutional analysis (guarantees, Basel II and risk taking, legal concept of abusive support, protection for over-indebtedness, information asymmetry and limited liability) and softer institutional reasons (religion, risk-taking culture). Copyright Springer Science+Business Media New York 2015
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Arvind Ashta & Laurence Attuel-Mendes & Zaka Ratsimalahelo, 2015. "Another "French paradox": explaining why interest rates to microenterprises dit not increase with the change in French usury legislation," Post-Print hal-01459128, HAL.
    • Handle: RePEc:hal:journl:hal-01459128
    DOI: 10.1007/s10657-013-9387-y
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    1. is not listed on IDEAS
    2. Raffaella Barone & Donato Masciandaro, 2017. "Crime, Money Laundering, And Credit Markets: Can Usury Exist At The Zero Lower Bound?," BAFFI CAREFIN Working Papers 1761, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Raffaella Barone & Donato Masciandaro, 2019. "Cryptocurrency or usury? Crime and alternative money laundering techniques," European Journal of Law and Economics, Springer, vol. 47(2), pages 233-254, April.

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    Keywords

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    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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