Comparative Review of Microfinance Regulatory Framework Issues in Benin, Ghana, and Tanzania

46 Pages Posted: 13 Jul 2005

Date Written: April 2005

Abstract

Gallardo, Ouattara, Randhawa and Steel investigate the microfinance regulatory regimes in Benin, Ghana and Tanzania, with a view to identifying key issues and lessons on how the overall regulatory framework affects integration of microfinance institutions into the financial system. The authors find that recognizing different tiers of both regulated and unregulated institutions in a financial structure facilitates financial deepening and outreach to otherwise underserved groups in urban and rural areas. That environment promotes sustainable microfinance under shared performance standards, and encourages regulatory authorities to develop appropriate prudential regulations and staff capacity. Case studies of the three countries raised important issues on promoting microfinance development vis-a-vis regulating them. Laws to regulate activities other than intermediation of public deposits into loans can result in disproportionately restrictive and unmanageable standards, even as dynamic microfinance sectors have emerged without conducive regulatory regimes. The three countries' regulatory experiences are used to highlight the importance of differentiating when prudential supervision is warranted and when regulatory oversight suffices, and to identify the agencies to carry out regulation. The paper addresses an important issue that has received scant attention, measuring and paying for the costs of regulating microfinance, and the need to build technical capacity of supervisory and regulatory staff.

Suggested Citation

Gallardo, Joselito and Ouattara, Korotoumou and Randhawa, Bikki and Steel, William F., Comparative Review of Microfinance Regulatory Framework Issues in Benin, Ghana, and Tanzania (April 2005). World Bank Policy Research Working Paper No. 3585. Available at SSRN: https://ssrn.com/abstract=743924 or http://dx.doi.org/10.2139/ssrn.743924

Joselito Gallardo (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Korotoumou Ouattara

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Bikki Randhawa

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

William F. Steel

University of Ghana - Adminstration

Ghana

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