Paper

Preparedness for Regulatory Compliance

Regulation, a feared term in microfinance: Is the fear justified?
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This presentation describes the different aspects of regulation in the field of microfinance. It lists the following regulated microfinance activities:

  • Financial transactions;
  • Reporting;
  • Personnel office establishment, etc.

The presentation then:

  • Describes the stages in the evolution of a microfinance institution (MFI);
  • Lists the financial transactions made by an MFI;
  • Examines the challenges faced by MFIs, which include:
    • Capital adequacy;
    • Mobilizing savings.
  • Discusses the sources of capital.

The presentation discusses:

  • Regulation, and argues that:
    • It is neither supportive nor restrictive;
    • It is over emphasized as a hurdle;
    • The regulatory environment is supportive.
  • Reporting and compliance, and states that:
    • An average MFI has good systems to comply with;
    • Reporting is straightforward for both deposit-taking and non deposit-taking MFIs.

The presentation concludes by recommending steps for the future:

  • Non-governmental organizations should be allowed to invest in MFIs;
  • New regulations for MFIs may not solve the capital adequacy problem or the ownership issues;
  • There has to be a change in the mindset towards regulation.

About this Publication

By Prasad, V.
Published