A Framework for Regulating Microfinance Institutions : The Experience in Ghana and the Philippines
An earlier Policy Research Working Paper (Hennie van Greuning, Joselito Gallardo, and Bikki Randhawa, "A Framework for Regulating Microfinance Institutions," WPS 2061, February 1999) presented a regulatory framework that identifies thresh...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/01/1683377/framework-regulating-microfinance-institutions-experience-ghana-philippines http://hdl.handle.net/10986/15748 |
| Summary: | An earlier Policy Research Working Paper
(Hennie van Greuning, Joselito Gallardo, and Bikki Randhawa,
"A Framework for Regulating Microfinance
Institutions," WPS 2061, February 1999) presented a
regulatory framework that identifies thresholds in financial
intermediation activities that trigger a requirement for a
microfinance institution to satisfy external or mandatory
guidelines-a tiered approach to regulation and prudential
supervision. The model focuses on risk-taking activities of
microfinance institutions that must be managed and
prudentially regulated. The author reports on the results of
the field testing and assessment of the tiered approach,
focusing on the experience of Ghana and the Philippines. The
two countries both have a wide range of informal,
semi-formal, and formal institutions providing financial
services to the poor, but differ in how they regulate
financial intermediation activities by microfinance
providers. In his assessment and a comparative analysis, the
author focuses on key issues in the regulatory and
supervisory environment for microfinance-and in the legal
system and judicial processes-being addressed by government
authorities and microfinance stakeholders in both countries.
He gives particular attention to the thresholds at which
intermediation activities become subject to prudential
regulation and regulatory standards for capitalization and
capital adequacy, asset quality and provisioning for
nonperforming loans, and liquidity management. seeks to
identify the key elements and characteristics of the
microfinance regulatory experience of Ghana and the
Philippines and to draw the lessons that may be useful for
other countries interested in establishing a regulatory
environment conducive to the development of sustainable
microfinance institutions. The experience of Ghana and the
Philippines shows that a transparent, inclusive regulatory
framework is indispensable for enabling microfinance
institutions to maintain market specialization and to pursue
institutional development that leads to sustainability.
Clear pathways for institutional transformation facilitate
the integration of microfinance institutions into the formal
financial system. |
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