Recent Trends in Microfinance Industry: Regulation, Supervision and the Principles of the Basel Committee Gianfranco A. Vento1
Dhaka, March 15th 2010 Very preliminary version. Please, do not quote without the author’s permission.
In the last few years, microfinance industry changed significantly due to several drivers. First, we are witnessing an increasing degree of professionalization within the industry, often moving from local spontaneous microlending initiatives to better equipped and organized institutions, characterized for a higher sustainability compared to the past. Second, a large number of global financial intermediaries, for different reasons, are starting to be involved in microfinance, so contributing to modify the landscape of the traditional MFIs. Third, new technologies, and especially the web based platforms for channeling funds directly from households to microfinance institutions and borrowers, can represent an interesting and alternative source of funding for MFIs. These alternatives make it easier to diversify the degree of dependence of such institutions from international donors and expensive funds’ providers. Finally, as a consequence of the above-mentioned drivers, it is possible to witness a very significant growth in microfinance business worldwide. Such important progresses of the industry make the role of regulators and supervisors more and more crucial and, therefore, it becomes always more urgent to highlight the key criteria that a country has to follow in order to design an efficient and effective regulatory framework. The recent attention on microfinance industry is also demonstrated by the interest towards this segment of financial market of the Basel Committee on Banking Supervision, which
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in February 2010 published a...