Publication: Microfinance Consensus Guidelines : Guiding Principles on Regulation and Supervision of Microfinance
Loading...
Date
2003-07
ISSN
Published
2003-07
Editor(s)
Abstract
Many developing countries and countries with transitional economies are considering whether and how to regulate microfinance. These guiding principles are formulated for the regulation and supervision of microfinance. This document is divided into five sections. The first section of the paper discusses terminology and preliminary issues. The second section outlines areas of regulatory concern that do not call for "prudential" regulation. The next section discusses prudential treatment of microfinance and Microfinance Institutions (MFIs). The fourth section briefly looks at the challenges surrounding supervision, and the final section summarizes some key policy recommendations.
Link to Data Set
Citation
“Christen, Robert Peck; Lyman, Timothy R.; Rosenberg, Richard. 2003. Microfinance Consensus Guidelines : Guiding Principles on Regulation and Supervision of Microfinance. © http://hdl.handle.net/10986/16958 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Financial Sector Assessment : Kenya(Washington, DC, 2005-03)This Financial Sector Assessment (FSA) is based on the work of the joint International Monetary Fund (IMF)- World Bank missions that visited Kenya from July 15 to July 24,2003, and from September 30 to October 15, 2003, in the context of the Financial Sector Assessment Program (FSAP). The principal objective of the missions was to assist the Kenyan authorities in assessing the development needs and opportunities for the financial sector and identifying potential vulnerabilities of financial institutions and markets to macroeconomic shocks, as well as the risks to macroeconomic stability from weaknesses and shortcomings in the financial sector. In this context, Kenya's compliance with the Basel core principles for Effective Banking Supervision (BCP); International Organization of Securities Commissions (IOSCO) principles for securities regulation; and corporate insolvency and creditor rights issues was formally assessed. A separate mission to assess Anti-Money Laundering (AML) or Combating the Financing of Terrorism (CFT) took place in October and November 2003; the Report on Observance of Standards and Codes (ROSC) from that mission is included in the FSAP documentation.Publication Moldova Financial Sector Assessment(World Bank, Washington, DC, 2014-12)Although Moldova has made some important advances since the 2008 FSAP update, risks to banking sector stability have become severe. There is an urgent need, therefore, to improve transparency and governance in the banking system. Although the banking sector appears to be well capitalized and liquid, important pockets of weakness remain and vulnerabilities may be masked by fraud or misreporting. The two securities settlement systems are in need of updating, though plans to take this reform forward are not finalized. Weaknesses in the insolvency and creditor or debtor regime create uncertainty and may deter some stakeholders from engaging in financial transactions. Especially in light of the weaknesses described above and recent geopolitical uncertainties, urgent action is needed to address these and mitigate the risks to which the financial system appears to be exposed.Publication Microfinance Institutions and Credit Unions in Albania : Regulatory, Supervisory and Market Development Issues(Washington, DC, 2008-06-17)The objective of this report is to present an assessment of the current legal, regulatory, and supervisory framework in Albania for microfinance, as well as an assessment of institutions rendering microfinance services (MFIs), including the Savings and Credit Associations (SCAs) and credit unions (CUs), to identify future development priorities. Economic conditions have improved in Albania in recent years, but a significant percentage of the population is still considered below the poverty level. The report lists future development priorities for the SCAs and MFIs, emphasizing poverty reduction through microfinancing. Several MFIs, and one CU, expressed some desire to borrow from the World Bank. The report finds this promising, as long as it does not crowd out commercial sources that serve to integrate MFIs, CUs, and SCAs into the larger financial sector. The growth of SCAs might be enhanced by further consolidation of smaller SCAs into larger SCAs. Mergers based on joint objectives and bounds can expand the geographical coverage and clientele base, facilitate the increase of cash flows and access to capital, and achieve economies of scale in view of reducing fixed costs. Albania also wishes to obtain a banking license and focus exclusively on the microfinance market. A tax exemption enables CUs and SCAs to build up capital through retained earnings. Eliminating their tax exemption would either reduce their capital, or require that CUs replace the taxed earnings with other means of capitalization to maintain the same capital reserves. The report recommends that the Bank of Albania (BoA) should continue to work with the CUs on consolidating and strengthening the SCAs.Publication Does Regulatory Supervision Curtail Microfinance Profitability and Outreach?(2009-06-01)Regulation allows microfinance institutions to evolve more fully into banks, particularly for institutions aiming to take deposits. But there are potential trade-offs. Complying with regulation and supervision can be costly. The authors examine the implications for the institutions profitability and their outreach to small-scale borrowers and women. The tests draw on a new database that combines high-quality financial data on 245 of the world s largest microfinance institutions with newly-constructed data on their prudential supervision. Ordinary least squares regressions show that supervision is negatively associated with profitability. Controlling for the non-random assignment of supervision via treatment effects and instrumental variables regressions, the analysis finds that supervision is associated with substantially larger average loan sizes and less lending to women than in ordinary least squares regressions, although it is not significantly associated with profitability. The pattern is consistent with the notion that profit-oriented microfinance institutions absorb the cost of supervision by curtailing outreach to market segments that tend to be more costly per dollar lent. By contrast, microfinance institutions that rely on non-commercial sources of funding (for example, donations), and thus are less profit-oriented, do not adjust loan sizes or lend less to women when supervised, but their profitability is significantly reduced.Publication Corporate Governance in Microfinance Institutions(World Bank, Washington, DC, 2015-04-15)This paper is organized as follows: this introduction is followed by a primer on the industry and on the evolution of the microfinance sector. The authors then examine the structure of the microfinance industry, (a) NGOs, cooperatives and credit unions, and commercialized vehicles; how they differ and why corporate governance differs according to the nature of the MFI; and (b) large networks, investment and bank-holding groups, and social services/faith-based groups. The authors then consider how corporate governance evolves and develops in MFIs as their structure and ownership changes. This is followed by an examination of the recurring issues and growing risks in the microfinance industry. The authors conclude with a look at the responses of governments, investors, and the industry itself to these issues and risks and propose some next steps.
Users also downloaded
Showing related downloaded files
Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication State and Trends of Carbon Pricing 2024(Washington, DC: World Bank, 2024-05-21)This report provides an up-to-date overview of existing and emerging carbon pricing instruments around the world, including international, national, and subnational initiatives. It also investigates trends surrounding the development and implementation of carbon pricing instruments and some of the drivers seen over the past year. Specifically, this report covers carbon taxes, emissions trading systems (ETSs), and crediting mechanisms. Key topics covered in the 2024 report include uptake of ETSs and carbon taxes in low- and middle- income economies, sectoral coverage of ETSs and carbon taxes, and the use of crediting mechanisms as part of the policy mix.Publication Europe and Central Asia Economic Update, Fall 2024: Better Education for Stronger Growth(Washington, DC: World Bank, 2024-10-17)Economic growth in Europe and Central Asia (ECA) is likely to moderate from 3.5 percent in 2023 to 3.3 percent this year. This is significantly weaker than the 4.1 percent average growth in 2000-19. Growth this year is driven by expansionary fiscal policies and strong private consumption. External demand is less favorable because of weak economic expansion in major trading partners, like the European Union. Growth is likely to slow further in 2025, mostly because of the easing of expansion in the Russian Federation and Turkiye. This Europe and Central Asia Economic Update calls for a major overhaul of education systems across the region, particularly higher education, to unleash the talent needed to reinvigorate growth and boost convergence with high-income countries. Universities in the region suffer from poor management, outdated curricula, and inadequate funding and infrastructure. A mismatch between graduates' skills and the skills employers are seeking leads to wasted potential and contributes to the region's brain drain. Reversing the decline in the quality of education will require prioritizing improvements in teacher training, updated curricula, and investment in educational infrastructure. In higher education, reforms are needed to consolidate university systems, integrate them with research centers, and provide reskilling opportunities for adult workers.