Formalizing Microsavings: A Tiered Approach to Regulating Intermediation

This policy note focuses on policy solutions that promote financial inclusion in developing countries.

Drawing on existing research, the note identifies the following policy areas that decision makers need to focus on. They include:

• Industry readiness and the right time for a specialized license for microfinance deposit institutions;
• Protecting deposits through regulation and supervision;
• Capital requirements and appropriate level of minimum capital for microfinance deposit institutions;
• Eligibility of MFIs to operate with a specialized license to mobilize deposits;
• Unique risk profile of microfinance and adapting prudential regulations to address it;
• Supervision of tiered microsavings;
• Reporting and disclosure requirements;
• Access through diverse range of microfinance providers;
• Costs involved and their justification.

Some countries have unregulated microcredit organizations that are well positioned to offer savings services. The note recommends that regulators enable these organizations to integrate into the financial system with a tiered, risk-based approach to licensing, regulating and supervising savings-based microfinance.