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A Framework for Regulating Microfinance Institutions : The Experience in Ghana and the Philippines

AFFILIATES ANNUAL GROWTH RATE APEX APEX ORGANIZATIONS ASYMMETRIC INFORMATION AUTONOMY AVERAGE CONSUMPTION BANK FAILURES BANKING INDUSTRY BANKING LAW BANKING LAWS BANKING SERVICES BANKING SYSTEM BANKRUPTCY BORROWING CAPITAL ADEQUACY CAPITAL BASE CAPITAL MARKETS CAPITALIZATION CASE STUDIES CGAP CHECKING COLLATERAL COMMERCIAL BANKS CREDIT UNIONS DEBT DEPOSIT INSURANCE DEPOSITS DEVELOPMENT BANKS DEVELOPMENT STRATEGY DONOR AGENCIES ECONOMIC GROWTH ELECTRONIC BANKING EXCHANGE RATES EXTERNAL SHOCKS FIELD TESTING FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKET POLICIES FINANCIAL MARKETS FINANCIAL REGULATION FINANCIAL RESTRUCTURING FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STRUCTURE FINANCIAL SUSTAINABILITY FINANCIAL SYSTEMS FINCA FORMAL INSTITUTIONS GEOGRAPHICAL AREAS GRAMEEN BANK GROWTH RATE HUMAN DEVELOPMENT INCOME INCOME LEVEL INEQUALITY INFLATION INFORMAL SECTOR INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL CAPACITY INSTITUTIONAL CHANNELS INSTITUTIONAL DEVELOPMENT INTEREST RATES INTERNATIONAL COMMUNITY INTERNATIONAL DEVELOPMENT INTERNATIONAL RESERVES LAWS LEGAL FRAMEWORK LEGAL PROVISIONS LEGAL SYSTEMS LEVERAGE LIQUIDITY LOCAL CURRENCY MACROECONOMIC STABILITY MFI MICRO FINANCE MICROBANKING MICROCREDIT MICROENTERPRISE MICROENTERPRISES MICROFINANCE MICROFINANCE CLIENTS MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE PRACTITIONERS MICROFINANCE REGULATION MICROFINANCE SECTOR MICROLOANS MORAL HAZARD NATIONAL DEVELOPMENT NONFINANCIAL SERVICES NONPERFORMING LOANS OFFERINGS ONSITE EXAMINATION OUTREACH PENALTIES PER CAPITA INCOME POLICY ENVIRONMENT POLICY FRAMEWORK POLICY RESEARCH POOR HOUSEHOLDS POVERTY ALLEVIATION POVERTY LEVELS POVERTY LINE POVERTY REDUCTION POVERTY REDUCTION STRATEGY PRIVATE SECTORS PRUDENTIAL REGULATIONS PRUDENTIAL SUPERVISION PUBLIC DEPOSITS PUBLIC RESOURCES PUBLIC SECTOR REDUCING POVERTY REGULATORY FRAMEWORK REGULATORY FRAMEWORKS RISK MANAGEMENT ROSCA RURAL AREAS RURAL BANKS RURAL CREDIT RURAL POOR SAVINGS SAVINGS FACILITIES SECURITIES SHARE CAPITAL SHAREHOLDERS SOCIAL SAFETY NETS SPECIALIZED BANKS SUBSIDIARY SUSTAINABILITY TECHNICAL ASSISTANCE TIME DEPOSITS URBAN AREAS URBAN HOUSEHOLDS VILLAGE BANKS REGULATORY FRAMEWORK FINANCIAL INTERMEDIATION MICROFINANCE PROGRAMS GUIDELINES RISK MANAGEMENT FINANCIAL SERVICES COMPARATIVE ANALYSIS SUPERVISORY STRUCTURES LEGAL SYSTEMS JUDICIAL PROCESS REGULATORY STRUCTURE CAPITALIZATION CAPITAL ADEQUACY PROVISIONING LIQUIDITY CONTROLS REGULATORY ENVIRONMENTS SPECIALIZATION INSTITUTIONAL TRANSFORMATION
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World Bank, Washington, DC
Africa | East Asia and Pacific | Ghana | Philippines
2013-09-09T21:46:44Z | 2013-09-09T21:46:44Z | 2002-01

An earlier Policy Research Working Paper (Hennie van Greuning, Joselito Gallardo, and Bikki Randhawa, "A Framework for Regulating Microfinance Institutions," WPS 2061, February 1999) presented a regulatory framework that identifies thresholds in financial intermediation activities that trigger a requirement for a microfinance institution to satisfy external or mandatory guidelines-a tiered approach to regulation and prudential supervision. The model focuses on risk-taking activities of microfinance institutions that must be managed and prudentially regulated. The author reports on the results of the field testing and assessment of the tiered approach, focusing on the experience of Ghana and the Philippines. The two countries both have a wide range of informal, semi-formal, and formal institutions providing financial services to the poor, but differ in how they regulate financial intermediation activities by microfinance providers. In his assessment and a comparative analysis, the author focuses on key issues in the regulatory and supervisory environment for microfinance-and in the legal system and judicial processes-being addressed by government authorities and microfinance stakeholders in both countries. He gives particular attention to the thresholds at which intermediation activities become subject to prudential regulation and regulatory standards for capitalization and capital adequacy, asset quality and provisioning for nonperforming loans, and liquidity management. seeks to identify the key elements and characteristics of the microfinance regulatory experience of Ghana and the Philippines and to draw the lessons that may be useful for other countries interested in establishing a regulatory environment conducive to the development of sustainable microfinance institutions. The experience of Ghana and the Philippines shows that a transparent, inclusive regulatory framework is indispensable for enabling microfinance institutions to maintain market specialization and to pursue institutional development that leads to sustainability. Clear pathways for institutional transformation facilitate the integration of microfinance institutions into the formal financial system.

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