The Implications of the Evolving Microfinance Agenda for Regulatory and Supervisory Policy

The growth in microfinance institutions (MFIs) has been accompanied by a widening of the range of financial services provided to the poor, to include voluntary savings facilities. This entails prudential risk to clients and poses the policy question of the most appropriate form of regulatory framework for MFIs. This article examines the implications for regulatory policy of the recent trend towards MFI provision of microfinancial services encompassing savings, credit and insurance, by evaluating what we know of the existing regulatory approaches, the main concerns with these approaches, and the merits of recent regulatory proposals for MFIs.