How to Regulate and Supervise Microfinance? - Key Issues in an International Perspective

What risks and profiles are common to the regulation of microfinance institutions?

This report reinforces the fact that microfinance holds enormous potential to support the economic activities of the poor and thus contributes to the alleviation of poverty. Underlining the importance of savings facilities for the poor, the report necessitates the following:

  • Framework of a financial system approach;
  • Adequate regulation and supervision of the microfinance industry to ensure safety of the deposits of the poor.

The report states that microfinance regulation and supervision are still in an embryonic stage to cater to the saving needs of the poor through a regulated system. The report discusses the following briefly:

  • Political issues in microfinance, including the justification of governments' interests in microfinance and its regulation;
  • Transformation from donorship to ownership and the role of donors in ensuring regulation;
  • Organization and economics of supervision including the costs and benefits of supervision;
  • Assessment methodologies and tools, including existing systems such as CAMEL and PEARLS.