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Microfinance Consensus Guidelines: Good Practice Guidelines

How should microfinance regulation be designed?
Design of microfinance regulation should not proceed very far without esti- mating supervision costs realistically and identifying a sustainable mechanism to pay for them. Donors who encourage governments to take on supervision of new types of institution should be willing to help finance the start-up costs of such supervision.
Should microfinance be supervised?
But in large parts of the world, most microfinance is provided by financial cooperatives that typically fund their lending from members’ share deposits and savings. It is sometimes argued that, because these institutions take deposits only from members and not from “the public,” they need not be prudentially supervised.
Should microfinance entail political discussion of interest rates?
Before donors and governments commit to building an enabling regulatory framework for microfinance, they need to con- sider the possibility that the process may unavoidably entail political discussion of interest rates, with results that could damage responsible microcredit.
Why is microfinance management so difficult?
Management and staff of the MFIs tend to be relatively inexperienced, and the supervisory agency has little experience with judging and controlling microfinance risk. Furthermore, many new MFIs are growing very fast, which puts heavy strain on management and systems.

How should microfinance regulation be designed?