Microfinance Regulations for Development

Microcredit offers a mechanism for providing collateral free credit to assetless households. Bangladesh and a number of developing countries have evolved their own genre of microfinance. The effectiveness of this new tool in alleviating poverty, the sustainability of the beneficiaries cum borrowers, the sustainability of the microfinance institutions in the absence of donor funds, transparency in their operations, and questions related to the practice of good governance came to the forefront of discussion with the maturity of this sector. As a result, the issue of regulation and supervision of this sector has opened up a whole range of debates and further exploration around different modes of operations being practiced. The central banks of most developing countries prepared to deal with the issue of microfinance regulation as a new type of financial sector. With this backdrop, Bangladesh’s Microcredit Regulatory Authority (established under the Microcredit Regulatory Authority Act, 2006) felt the necessity to examine various aspects of regulations and to share experiences with other countries. A three-day international conference on Microfinance Regulations was organized from 15th March 2010. Eleven papers from eight countries from Asia, Africa and Latin America were presented at the conference. Later this was revised and prepared as the original paper.