In order to reach its full potential and further grow as a credible development tool, the microfinance industry must eventually be able to enter the area of licensed, prudentially supervised financial intermediation.
At the same time, microfinance regulation and supervision is necessarily complex and filled with challenges. It is also contextual. Blindly extending domestic prudential rules and consumer protection laws will not work.
Specific adjustments will be necessary to capture the specificities of microfinance activities, both in the field of prudential and non-prudential regulation. Regulators will also have to weigh the potential costs of regulation and supervision, including the potential unintended consequences of regulation, particularly about innovation and competition.
This course will explore a broad range of regulatory policy issues affecting microfinance and the delivery of a variety of financial services to poor people. It will begin with a brief exploration of rationales for different types of financial system regulation, and their applicability in the microfinance context, as well as how to decide when and how to regulate microfinance.
The course will focus on prudential regulation and supervision, examining how to decide which institutions require prudential regulation and supervision and the applicable prudential standards. It would also discuss techniques for measuring and testing microcredit loan quality. Various hot regulatory topics outside the prudential regulation arena will be covered based on the interest of participants.