A 20 per cent cap is precisely what is required

Why a 20 per cent cap specifically? Because the motions says so. Jokes. The motion says 20% because it is in fact a great idea, and here's why. A 20% cap on the interest rate for personal loans benefit all concerned parties: banks, borrowers & society. On the part of banks, a 20% cap still enables them to make a decent profit on loans. The economic incentive for banks to offer personal loans is therefore not taken away. Our policy will, at most, influence the SIZE of the loans and the frequency of BAD loans. But that is precisely our policy objective: limiting the magnitude of financial risk being undertaken by effectively encouraging lower, more managable principal amounts to be lent to clients. In addition, of course, banks have sources of revenue other than personal loans (corporate loans), and these often count for a large slice of their overall income. So banks are not going to be crippled by a policy regulating their personal loans-policy. In fact, banks' financial health is safeguarded by encouraging them and their employees to temper any imprudent risk-taking instincts they may have. Clients, too, benefit: by capping the interest rate on a principal sum, the total amount of money a client repays the bank, will be less than it otherwise might be. This can only be a good thing. Obviously, as we intend, a client might now access slightly smaller amounts of personal loan than under systems allowing them to borrow at any rate... but that's okay. In the medium- and long-terms, clients are better served by not getting into a debt spiral. Debt spirals invariably start from clients taking out loans that can often take years to pay back. This is a pervasive problem, affecting countries from South Africa [[http://www.highbeam.com/doc/1G1-175223761.html]] [[http://www.indigenousjournal.com/IIJEASVolIIIss1Mashigo.pdf]] to the USA [[http://bbs.chinadaily.com.cn/viewthread.php?tid=624511]]. So while it may seem immediately gratifying to buy, say, a porsche, and use your house as collateral by taking out a loan with a 40% interest rate, say, in the long term such a client becomes economically less healthy since the budgetary pressures skyrocket when trying to maintain monthly payments. Our policy incentivises, in a creative way, more responsible financial planning, and more prudent behaviour that protects a client from their own penchant to think of now, rather than tomorrow. Long live homo economicus! Society, finally, benefits too: a society in which the amount of debt held by citizens is as low as possible, with a greater percentage of wealth having been saved, and perhaps even carefully invested, is a society better able to deal with economic crises that might nevertheless result from other, exogenous factors [[http://ideas.repec.org/p/wii/wpaper/45.html]]. This is not to deny the usefulness of consumer consumption for the overall economy's sake: hence the balance we strike by making it economically meaningful for banks to continue with personal loans, but at a capped interest rate. Everyone wins: banks still make a profit; clients can still ask for loan assistance in times of trouble; and society has a bulwark against the potential effect of uncontrolled, excessively risky, high-interest lending. How can anyone NOT sign their name to our proposal?!