Case study

Regulation and Supervision of Microfinance Institutions: Case Studies

Developing an appropriate regulatory framework for microfinance

The Regulation and Supervision Project of the MicroFinance Network reviews case experiences in nine countries that have experience with MFIs. These countries were chosen because of the presence of a MicroFinance Network member and because they illustrate a range of regulatory responses in diverse settings. Principal findings from this project are summarized in the first volume. The second volume presented here outlines country case studies and offers a detailed analysis of field experience.

Examples from Bangladesh, Indonesia and Bolivia provide evidence of the potential of MFIs to deliver financial services on a large scale. While they are exceptional cases, these models are being continuously emulated. With proper conditions, including an appropriate regulatory environment, there will be a growing number of successful MFIs in the coming years. It is hoped that regulators will be proactive in promoting this.

Cases highlight two general approaches to regulating MFIs:

  • Situations in Bolivia, Kenya and Colombia show the experiences of regulating MFIs within the existing regulatory framework, either as a commercial bank or as a finance company. They also highlight mismatches between the standard regulatory framework and the provision of microfinance services;
  • Cases from Peru, West Africa and Bolivia provide insight into initial attempts to create special categories of laws designed specifically to MFIs;
  • Experiences from South Africa and the Philippines demonstrate a learning process for MFIs and policymakers in creating standards for the local microfinance industry.

The document concludes that although these efforts are in the early stages of development, they do suggest possible first steps towards identifying an appropriate regulatory approach to microfinance.

[Adapted from author's abstract]