Microfinance Legal Environment in Azerbaijan, Bosnia & Herzegovina, and Central Asia

This paper examines the legal and regulatory environment for microfinance in Azerbaijan, Bosnia and Herzegovina, Kazakhstan, Kyrgyz Republic and Tajikistan.

The paper describes various types of microfinance entities present in each country and details their functions. It states that:

• Azerbaijan’s new law on Non-Bank Credit Institutions (NBCI), adopted in 2009 requires commercially oriented NBCIs to register themselves as limited liability companies;
• In Bosnia and Herzegovina, Microcredit Organizations (MCOs) operate either as for-profit microcredit companies (MCCs) or nonprofit microcredit foundations (MCFs);
• New microfinance law adopted in 2006 allows MCOs to transform into MCCs, enabling them to open their capital structure to investors;
• Kazakhstan introduced the law on microlending organizations (MLOs) in 2003;
• MLOs are recognized, local legal entities, but are not considered part of the formal financial system and are restricted from taking deposits;
• Kyrgyz Republic is the only country with an official national microfinance strategy;
• Kyrgyz microfinance includes microcredit companies, microcredit agencies and microfinance companies;
• Tajikistan microfinance includes microcredit deposit organizations (MDOs), microlending organizations (MLOs) and microlending foundations (MLFs);
• MDOs and MLOs are commercial entities, while an MLF is a social foundation.