Thursday, April 16, 2009

MPI as a new regulatory entity?

Since the growth of Micro Finance Institutes (MFI's) in many parts of the world, new regulatory bodies were established to regulate Micro Finance. It was (wisely) recognised that existing regulation and control for lending products cannot be made applicable (as-is) to the micro-lending industry. The much more smaller amounts and a risk profile very different to traditional mainstream lending products necesitated a new thinking. The format of regulatory bodies for MFI's are diffirent from one country to another, but many similarities exist.

As we are grapling with mobile payments, money transfer and providing banking services to the underbanked, one should consider a new category of Financial Services. At the same time it may be advisable to establish a new regulatory dispensation (with different rules and applications), to not only govern these financial services, but also facilitate the growth of the industry. The question is, will central banks and national regulators be bold enough to do this?

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