Regulation of supervision of microfinance

To reach large numbers of people, microfinance must eventually move into institutions that are licensed and supervised by a country's financial authorities. A licensed institution can offer savings services to its clients and multiply its own equity capital by capturing deposits. Because microfinance is different from conventional banking, the banking laws and regulations in most countries will eventually need some adjustment to accommodate licensed microfinance. However, not all countries need to address regulation in the near term. This describes microfinance regulation and supervision, discusses considerations for regulating microfinance, proposes a focus on supervisory capacity before, not after, regulation; and finally, addresses the appropriate role of donors in microfinance regulation.