Rate caps may backfire

The usury law might soon be revived. It was abolished in 1998, soon after the Asian financial crisis hit Korea. The government and the opposition have agreed that high-interest private loans are a serious issue that must be resolved to protect the welfare of low-income households. They will pass legislation to put a ceiling on interest rates at the ongoing extra session of the National Assembly.
We agree that excessive financial burdens can threaten the livelihood of low-income households. However, an interest rate ceiling is something to be approached cautiously. Such a restriction might, despite the initial good intentions behind it, impose an even heavier burden on low-income families, depriving them of access to one of their few sources of emergency funding. Instead, it would be more effective to increase the range of financial services that the average person can apply for and actually benefit from. As an example, the government could encourage and support the application of microcredit funds for those living in poverty. Sometimes, good intentions are not enough. Our economic welfare policies should be based on reality rather than ideals.