PHILIPSBURG--The Joint Court of Justice on Monday delivered a final judgment on the appeals of several microlenders in Curaçao against the decision of the Central Bank of Curaçao and St. Maarten to apply a maximum interest rate of 27 per cent per year for all microcredits. The court found that the Bank was within its rights to introduce a maximum interest rate.
The court found the rate of 27 per cent acceptable, except for loans with a maturity of not more than three months. For these types of loans, the Appellate Court has set a maximum interest rate of 45 per cent for the period of June 1, 2021, to June 1, 2023. After that, a definitive percentage can also be established for short-term loans, the court said.
Microcredits are credits up to NAf. 5,000 with a maximum term of two years. Often it concerns somewhat larger credits of around NAf. 2,000 to buy consumer goods, but more often these are smaller credits of around NAf. 150 to provide for the daily livelihood. The larger loans usually have a longer term than the smaller ones.
Until the Central Bank set a maximum interest rate, the percentages were free. As a result, some microlenders used high to very high interest rates. As a result, their clients regularly ran into financial problems. The Central Bank considered this undesirable, and the Joint Court agreed.
The reason for setting temporarily higher interest rates for short-term loans is that these types of loans meet a social need for people who cannot borrow from a regular bank and that they need these credits for their “basic needs,” the court stated.
According to the Joint Court, the Central Bank had not sufficiently investigated whether the microlenders will be commercially capable of using a percentage of 27 per cent to offer such short-term credits. The new percentages will take effect on June 1, 2021, to give the microlenders the opportunity to adapt their business practices and offerings.
