Microfinance Regulation and Market Development in Latin America

Abstract The evolution and development of microfinance markets is conditioned by external factors such as macroeconomic variables, institutional country level, availability of conflict resolution mechanisms, informal sector features, and applicable regulation. A careful design of the latter aspect is needed because it can either be a tool for promotion (by facilitating and making flexible microfinance institutions activities) or a restriction to market development by setting unnecessary limits or requirements. Considering these ideas, this paper analyzes the relationship between regulatory frameworks for microfinance in 17 Latin American countries and the level of development and specific features in its corresponding microfinance markets.