A framework for regulating microfinance institutions

The continuum of institutions providing microfinance cannot develop fully without a regulatory environment conducive to their growth. Without such an environment, fragmentation and segmentation will continue to inhibit the institutional transformation of microfinance institutions. The authors recommend a tiered approach to external regulations, one that takes into account the different types of microfinance institutions, the products they offer, and the markets they service. A tiered approach canbe useful in designing regulatory standards that recognize the basic differences in structure of capital, funding, and risks faced by different kinds of microfinance institutions. The model they develop for a regulatory framework identifies thresholds of financial intermediation activities, thresholds that trigger the requirement that an institution satisfy external or mandatory regulatory guidelines. It focuses on risk-taking activities that must be managed and regulated. They illustrate the usefulness of the model by practically applying prudential considerations to various categories and values of financial risk for each of three broad categories of microfinance institution: 1) Those that depend on other peoples'money (such as donor or public sector funding). 2) Those that depend on members'money. 3) Those that leverage the general public's money to fund microfinance loans. For each category, the model highlights: 1) The observed value ranges for selected indicators of financial risk. 2) Recommended ranges of value suitable for consideration under internal governance. 3) Suggested threshold values that indicate the need for external regulation. A transparent, inclusive framework for regulation will preserve the market specialties of different types of microfinance institutions - and will promote their ultimate integration into the formal financial system. One example of the kind of regulation the authors recommend: Require standard registration documents and procedures - no different from those required of regular corporations - including the designation of a central government agency with which they should register as corporate entities.Payment Systems&Infrastructure,Banks&Banking Reform,Financial Intermediation,International Terrorism&Counterterrorism,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Rural Finance,Insurance&Risk Mitigation

The relationship between psychological capital,life satisfaction and employee retention

South African organisations are faced with the challenge of retaining key and critical employee cohorts. externally focused methods and models of turnover and retention fail to comprehensively explain the lack of highly skilled employees and the inability of organisations to successfully retain these employee groupings. This nonexperimental correlational study investigated the relationship and interaction between the positive psychological constructs of psychological capital and life satisfaction and employee turnover intention of a South African sample of specialist and management level employees (n=150). The survey method was utilised to gather data for the study with a biographical questionnaire, the Psychological Capital Questionnaire-12 (PCQ-12), the Satisfaction with Life Scale (SWLS) and the Turnover Intention Scale-6 (TIS-6). Data analysis was conducted in the form of descriptive and inferential statistics including frequency tables, Cronbach’s Alpha testing, exploratory factory analysis, correlation analysis, t-tests, analysis of variance and structural equation modelling. The results indicated that significant relationships exist between psychological capital, life satisfaction and employee turnover intention. A substantial negative relationship was found between psychological capital and employee turnover intention, as well as a small, yet definite negative relationship between life satisfaction and turnover intention. Even though the results indicated a substantial positive relationship between psychological capital and life satisfaction, the relationship with employee turnover intention was insignificant when the two variables were correlated. This study adds to the current body of knowledge regarding employee retention in South Africa, and allows for a number of future research avenues to be explored

SIBU and the crisis of water service delivery in Sannieshof, North West Province

In 2007 the residents of the town of Sannieshof in North West Province declared a dispute with the Tswaing Local Municipality on the grounds that the state of local service delivery left much to be desired. The ratepayers then formed the Sannieshof Inwoners Belastingbetalers Unie (SIBU) which literally took over the functions of local government of the town, functioning as a local government within a local government. This article provides a historical narrative of the conflict between SIBU and Tswaing Local Municipality, a dispute which was taken as far as the provincial High Court. Then follows an outline of conditions in Sannieshof and the townships of Agisanang and Phelindaba. Attention is given to the perceptions of local residents on the prevalent conditions, specifically in respect of water supply and sanitation service delivery. In the third section there are some theoretical perspectives on political culture, socialisation and happiness. A debate is provided on how these phenomena manifest under existing conditions in Sannieshof, and more particularly, in its adjacent townships of Agisanang and Phelindaba.https://doi.org/10.4102/td.v6i1.12

The Exposure of Microfinance Institutions to Financial Risk

This study examines the exposure of microfinance institutions to liquidity, interest rate and foreign exchange (FX) risk. It builds on a manually collected set of data on the maturity structure of assets and liabilities of the 309 largest microfinance institutions (out of which 112 actually report the maturity structure). The data suggests that, on average, microfinance institutions in the sample face virtually no liquidity risk and that exposure to FX risk is lower than generally assumed. Linking risk exposure to institutional characteristics, I find that legal status and regional affiliation are correlated to risk exposure while regulatory quality is not

Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia

This paper explores the significance of Islamic banking in Malaysia for stability in the country's economy as a whole. Neither conventional theory nor Islamic economics puts forward a systematic explanation of financial intermediation; consequently, neither is capable of identifying destabilizing elements in the system. Instead, a flow- of-funds approach similar to Minsky's own is applied to the (post-) modern consumption-led) business cycle and financial (and asset) market. Malaysia's structural current account surplus contributes to the overcapitalization of domestic firms. This in turn finances a financial (as opposed to an industrial), consumptionled (instead of investment-led) business cycle, where banking favors destabilizing asset price inflation. Islamic banks operating interdependently with conventional ones contribute to economic destabilization channeling surplus funds from the corporate to the household sector

The Inter-temporal relationship between Risk, Capital and Efficiency: The case of Islamic and conventional banks

The paper investigates the relationship between risk, capital and efficiency for Islamic and conventional banks using a dataset spanning 14 countries over the 2000-2012 period. We use the z-score as a proxy for insolvency risk, cost efficiency is estimated via a stochastic frontier approach and capitalisation is reflected on the equity to assets ratio. An array of bank-specific, macroeconomic and market structure variables are used in a system of three equations, estimated using the seemingly unrelated regression (SUR) technique. We find that the capitalisation response to increases in insolvency risk is more pronounced for Islamic banks but has an approximately five-times smaller effect on risk mitigation compared to conventional banks. Higher cost efficiency is related to lower risk for conventional banks, but the opposite is true for Islamic banks. The link between cost efficiency and capitalisation attests to a substitutional effect for the case of conventional banks, but a complementary effect for Islamic banks. Our findings give new insights on the use of efficiency to gauge capital requirements for financial institutions and are particularly relevant for regulators and policy makers in countries where both bank types operate