Microfinance and Regulatory Environment in Egypt

This paper argues against regulating microfinance in Egypt. The author states that a lack of regulation has resulted in the evolution of many best practices such as:

• Stepped lending approach;
• Quick credit procedures and client friendly services;
• High repayment discipline;
• Use of positive real interest rates;
• Efficient administration;
• Decentralized credit delivery.

The paper also states that as a majority of the microfinance institutions (MFIs) are small, they may not respond well to regulation and may deviate from their original missions. Finally, the author makes some policy recommendations:

• Creating favorable competition between MFIs and catering to the different needs (individual vs. groups, urban vs. rural);
• Providing successful NGOs the option to maintain a special new legal identity to capture savings and to offer a wider range of financial services;
• Creating a data base for the sector (credit Bureau option), creating a useful national network for MFIs, and promoting best practices among MFIs in financial and business development services (BDS).