The Regulatory Reform Process for Microfinance in Armenia

This paper discusses the progress in the regulation of microfinance in Armenia. The paper lists the following means through which microfinance activities are conducted in Armenia:

• Non-government organizations (NGOs);
• Non-depository organisations and;
• Banks.

The paper discusses the regulatory treatment of microfinance in Armenia and states that:

• Banks operate under banking laws and Central Bank regulations;
• Micro-lending foundations operate based on the respective provisions of the Civil Code  and the Law on Foundations and;
• The Central Bank has taken important steps to loosen the regulation of credit organizations that do not attract public funds.

The paper discusses regulatory reform and states that:

• The Armenia Micro Enterprise Development Initiative (MEDI) hosted a Stakeholders Policy Forum for practitioners and donors to discuss the issue of microfinance regulation;
• MEDI worked with the World Bank to insert a conditionality clause, according to which, microfinance will be regulated by the Central Bank within the legal framework already established for non-depository credit organizations and;
• The Central Bank has stated its willingness to ensure adequate regulation of microfinance in line with global best practices.

The paper concludes that improved regulation of microfinance will:

• Solve the legal issues faced by microfinance institutions (MFIs);
• Strengthen their organizational structures and management systems and;
• Enable MFIs to access commercial sources of debt and equity, allowing their integration into the financial system of the country.