regulation of microfinance – a level playing field for all microfinance providers mark bienstman -...
DESCRIPTION
Introduction Before we start : what is the reality in the field ? * > MFI’s * < are +/- sustainable (Mix db) * > (very) small structures with (very) limited resources * limited resources at the level of national regulators/supervisors as well.TRANSCRIPT
Regulation of Microfinance – a level playing field for All microfinance
providers Mark Bienstman - senior adviser WSBI
UN DESA panel discussionNew York, 10 April 2007
overview
Introduction: put the topic in perspective
Regulation: some specific concerns from Savings Banks
Introduction Before we start :
what is the reality in the field ?* > 10.000 MFI’s* < 1.000 are +/- sustainable (Mix db)* > 9.000 (very) small structures with (very) limited resources* limited resources at the level of national regulators/supervisors as well.
In practice: don’t regulate if you cannot monitor
(avoid creating costs with no added value) limit the number of players you need to
monitor. HOW ?a) «killing» the (very) small? NO - they have added value in the A2F processb) «push» to achieve scale? YES
HOW to achieve scale in microfinance ? Internal growth (-> slow process) M & A (-> different «roots» -> NGO) Create a national association/Federation including a «central» bank – cfr Mexico/Bansefi
and El Salvador/Fedecrédito («light») cooperation agreements with bigger
(regulated) Institutions (make a clear split between «distributing» and «managing» financial products)
Regulation: specific concerns from Savings Banks
Microfinance goes beyond MFI’s Allow for a «pluralistic» financial sector Keep coherence between different
government policies Regulation in line with the risks Regulation of ALL financial players Allow «one stop shopping»
Microfinance goes beyond MFI’s
Microfinance is more than microcredit Microfinance is offered by a broad range
of financial institutions and intermediaries, so regulations should cover all these.
A specific regulation for microfinance can be indicated, but not a specific regulation for MFI’s.
Regulation -> PLURALISMEsupport a «pluralistic» financial sector (to
allow choices for the customer):* NGO (-> MFI’s)* cooperatives and/or credit unions: members owned organisations* state-owned (retail and/or savings) banks: stakeholders driven * commercial banks shareholders driven * ….
Regulations -> COHERENCE
facilitating general access to finance requires coherence with other national policies:
such as development policy - rules on KYC – AML – FATF.…
But also with budgetary policies: conflict of interest between A2F (i.e. Via Postal Savings Banks) and reduction of public spending (i.e. In the Postal area)
Regulation -> RISK DRIVEN
«the more risks, the more regulation» There is a difference for:
savings (deposit taking) credit or lending (where is the funding
coming from?) payments services (retail versus
institutional) insurance (pm)
Regulation -> WHO ?
All financial institutions should be regulated and supervised by financial specialists (i.e. Ministry of Finance - Central Bank - Banking Commission...) same business -> same risks -> same rules
NOT by departments in charge of: PTT (cfr the Postal Savings Banks) Cooperatives (cfr credit unions) …
Regulation and «one stop shopping»
Today a lot of Savings Banks are «savings only»: no credit (all funding is for public finance) best
allocation of resources ? no cross-selling -> no «one stop shopping» no payments services (current account - payment
cards ) -> difficult to handle remittances ! no access to national interbank payment and/or
clearing and settlement system(s) no fair competition…..
Conclusion ?
By all means, avoid «crowding out»: At the level of the customer:
regulation should promote (not kill!) easy access to finance;
At the level of the microfinance providers:regulation should create a level playing field for ALL providers, regardless of their legal status - regardless of their ownership structure – regardless of their size - …
THANK YOU !