Microfinance Regulation: Lessons from Bolivia, Peru and the Philippines

This paper examines MFI regulation and supervision in three countries that have been receiving the highest rankings from Microscope for their regulatory frameworks and practices, namely, Bolivia, Peru, and the Philippines. It identifies and examines good practices in these countries, in order to understand what best practices in microfinance regulation and supervision might involve.The paper states that risk-based supervision has become the norm in recent years for regulating and supervising financial institutions, but there are differences in the interpretation and application of risk-based supervision. Key points include:

• Regulation is organized according to institutional type in the Philippines;
• Experts in the field of regulation and supervision recommend that responsibilities should be organized according to portfolio type;
• Expansion of credit bureau activity and exposure to over-indebtedness, helped Bolivia recover from problems that evolved from inappropriate use of credit scoring for microfinance;
• Peru has been at the forefront in the development of credit bureaus and their application to microfinance;
• Increasing interest in responsible finance has resulted in pressure for regulatory agencies to move into consumer protection and focus on transparency and dispute resolution.