Microfinance Regulatory Council Performance Assessment

This paper presents a review of the Microfinance Regulatory Council (MFRC) undertaken by the Center for Institutional Reform and Informal Sector (IRIS).

The review found that:

• The MFRC has met or exceeded Exemption Notice requirements with regard to the operations of a micro-lender regulatory institution;
• Its Board, structure, staffing, operations and relations with both lenders and consumers are sound;
• It has made substantial progress in a short time and has built a strong basis for overall market governance;
• The MFRC did not meet the Exemption Notice requirements in the two areas of:
  • Annual publication of information regarding charges;
  • Clearance of loan agreements.

The paper suggests the following six recommendations for MFRC improvement:

• The Exemption Notice should be modified. The MFRC should be made an official inspector, with powers to develop cases to turn over to the public prosecutor;
• The Department of Trade and Industry (DTI) should finance MFRC activities on consumer education and resolution of consumer queries;
• There should be a blended strategy of donor and government finance;
• A member of the Finance Ministry should join the Board to increase MFRC engagement in low-end credit market legal reform thinking;
• Rules on the duties of debt collectors, agents, etc. should be properly laid out;
• Annexure A of the notice should be amended.