Financial intermediation, regulation and the formal microcredit sector in South Africa

This article evaluates demand- and supply-side aspects of the formal microcredit sector in South Africa and the environment in which the sector is regulated. Although South Africa has a competitive financial sector relative to a sample of upper middle-income countries, the historical bias towards formal sector banking resulted in a lack of appropriate credit instruments for poorer people. In 1992, new regulations facilitated the legalisation of microfinance institutions and, by 2000, the sector had grown to over 2 per cent of total credit extended by the monetary sector, with over 1 300 institutions supplying microcredit to the public. The article presents the first statistics of different types of microcredit institutions as well as some of their disbursement trends, recorded since 1999 by the Micro Finance Regulatory Council. Thereafter, the demand for credit is assessed between 1995 and 2000, before best-practice regulation and South Africa's degree of compliance are discussed.

The development of microfinance in Cameroon: Focus on regulation

International audienceWhile the microfinance regulations in Cameroon have a positive influence in professionalizing the microfinance sector, it seems to have also created hurdles for MFIs to fulfill their social mission of financial inclusion. The evolution of activities of the microfinance sector over the years led to changes in the regulatory environment through the establishment of new regulations that progressively professionalize the sector and controlled certain derives. Financial inclusion has been hindered by insufficient supervision and tight regulations in terms of board members' qualifications, loan documentation requirements, and provisioning and liquidity requirements. Regulations still need to reflect more the specificities of the microfinance sector and be matched with adequate supervision in order to achieve its dual role of financial inclusion and safeguarding the financial system

Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence

In spite of increasing pressure on microfinance institutions (MFIs) operating in developing countries to transform into regulated financial intermediaries, to date, no study has investigated whether regulated MFIs actually achieve better financial results and reach more poor clients than nonregulated MFIs. This article explores the impact of regulation on MFI performance using newly released data for 114 MFIs from 62 countries in an empirical model where performance is specified as a function of MFI-specific, regulatory, macroeconomic and institutional variables. Consistent with recent cross-country evidence on the impact of banking regulations on bank performance (Barth et al., 2004), this article finds that regulatory involvement does not directly affect performance either in terms of operational self-sustainability or outreach. The article also finds that less leveraged MFIs have better sustainability. The policy implication is that MFIs' transformation into regulated financial institutions is may not lead to improved financial results and outreach. However, the finding that MFIs collecting savings reach more borrowers suggests that there may be indirect benefits from regulation, if regulation is the only way for MFIs to access savings.