Publication:
Microfinance Consensus Guidelines : Guiding Principles on Regulation and Supervision of Microfinance

Loading...
Thumbnail Image
Files in English
English PDF (670.31 KB)
1,995 downloads
English Text (124.28 KB)
185 downloads
Published
2003-07
ISSN
Date
2014-02-10
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.
Digital Object Identifier
Associated URLs
Associated content
Report Series
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) World Bank
    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) World Bank Group
    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) World Bank
    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) Cull, Robert; Demirgüç-Kunt, Asli; Morduch, Jonathan
    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) Lieberman, Ira W.; Ard, Laura; Di Benedetta, Pasquale
    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, June 2025
    (Washington, DC: World Bank, 2025-06-10) World Bank
    The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.
  • Publication
    High and Dry
    (World Bank, Washington, DC, 2016-05-03) World Bank Group
    The impacts of climate change will be channeled primarily through the water cycle, with consequences that could be large and uneven across the globe. Water-related climate risks cascade through food, energy, urban, and environmental systems. Growing populations, rising incomes, and expanding cities will converge upon a world where the demand for water rises exponentially, while supply becomes more erratic and uncertain. They will jeopardize growth prospects in the regions worst affected and in some of the poorest countries. These challenges are not insurmountable, however, and smart policies that induce water-use efficiency, align incentives across regional and trading partners, and invest in adaptive technologies can go a long way toward reducing or eliminating these negative effects.
  • Publication
    Digital Progress and Trends Report 2025: Strengthening AI Foundations
    (Washington, DC: World Bank, 2025-11-24) World Bank
    The recent rapid evolution of artificial intelligence (AI) has outpaced society’s ability to fully grasp its implications. Unlike technological shifts that have unfolded over decades, AI’s integration is accelerating at an unprecedented speed and scale. Along with AI’s immense opportunities come new responsibilities—especially for ethical deployment, accountability, and alignment with human values—that have few precedents in previous technology revolutions. This 2025 edition of the "Digital Progress and Trends Report (DPTR)" explores how low- and middle-income countries can harness AI to drive inclusive and sustainable development—and avoid being left behind. The report explains what makes AI different from earlier general-purpose technologies and why it matters for development. It introduces the 4Cs, the foundations essential for AI adoption, adaptation, and innovation: connectivity (infrastructure), compute (processing power), context (training data, algorithms, and applications), and competency (digital skills). Drawing on rich, novel data sets, this DPTR benchmarks countries across the 4Cs, analyzes supply and demand dynamics, and identifies market failures and externalities where policy action is urgently needed. This report emphasizes the need for global coordination and targeted interventions to close the widening AI gaps, where resource constraints threaten to exacerbate inequality. Policy insights will help governments unlock AI’s potential while navigating its risks.
  • Publication
    Rural Employment in Africa
    (Washington, DC: World Bank, 2022-02-23) Maertens, Miet; Christiaensen, Luc
    Africa’s rural population continues to expand rapidly and labor productivity in agriculture and many rural off farm activities remains low. This paper uses the lens of a dual economy and the associated patterns of agricultural, rural, and structural transformation to review the evolution of Africa’s rural employment and its inclusiveness. Many African countries still find themselves in an early stage of the agricultural and rural transformation. Given smaller sectoral productivity gaps than commonly assumed, greater size effects and larger spillovers, investment in agriculture and the rural off-farm economy remains warranted to broker the transition to more and more productive rural employment. The key policy questions thus become how best to invest in the agri-food system (on and increasingly also off the farm) and how best to generate demand for nonagricultural goods and services which rural households can competitively produce. Informing these choices continues to present a major research agenda, with digitization, the imperative of greening and intra-African liberalization raising many unarticulated and undocumented opportunities and challenges.
  • Publication
    Agriculture in Africa
    (Washington, DC: World Bank, 2018) Christiaensen, Luc; Demery, Lionel; Christiaensen, Luc; Demery, Lionel; Adjognon, Guigonan Serge; Barrett, Chris; Binswanger-Mkhize, Hans P.; Carletto, Calogero; Corral, Paul; Davis, Benjamin; Deininger, Klaus; Di Giuseppe, Stefania; Dillon, Brian; Gilbert, Christopher; Guelfi, Anita; Hill, Ruth; Kaminski, Jonathan; Kilic, Talip; Le Cotty, Tristan; Liverpool-Tasie, Saweda; Maître d’Hôtel, Elodie; McCullough, Ellen; Miller, Daniel C.; Munoz, Juan Carlos; Naudé, Wim; Nagler, Paula; Ndiaye, Moctar; Nikoloski, Zlatko; Ogunleye, Wale; Omonona, B.T.; Palacios-López, Amparo; Reardon, Tom; Sanou, Awa; Savastano, Sara; Sheahan, Megan; Xia, Fang
    Stylized facts set agendas and shape debates. In rapidly changing and data scarce environments, they also risk being ill-informed, outdated and misleading. So, following higher food prices since the 2008 world food crisis, robust economic growth and rapid urbanization, and climatic change, is conventional wisdom about African agriculture and rural livelihoods still accurate? Or is it more akin to myth than fact? The essays in “Agriculture in Africa – Telling Myths from Facts” aim to set the record straight. They exploit newly gathered, nationally representative, geo-referenced information at the household and plot level, from six African countries. In these new Living Standard Measurement Study-Integrated Surveys on Agriculture, every aspect of farming and non-farming life is queried—from the plots farmers cultivate, the crops they grow, the harvest that is achieved, and the inputs they use, to all the other sources of income they rely on and the risks they face. Together the surveys cover more than 40 percent of the Sub-Saharan African population. In all, sixteen conventional wisdoms are examined, relating to four themes: the extent of farmer’s engagement in input, factor and product markets; the role of off-farm activities; the technology and farming systems used; and the risk environment farmers face. Some striking surprises, in true myth-busting fashion, emerge. And a number of new issues are also thrown up. The studies bring a more refined, empirically grounded understanding of the complex reality of African agriculture. They also confirm that investing in regular, nationally representative data collection yields high social returns.