Regulation and supervision
The regulatory framework and supervision are vital factors in the building of a sustainable microfinance sector. As of 2000, Asian governments have become aware of the need to introduce a regulatory framework adapted to the sector’s development and to supervise its operators just like any other player in the financial system.
The exceptions involve countries such as China, Bangladesh, Sri Lanka or those in the Middle East, for example, in which legal framework restricts and blocks the development of the industry along commercial lines. There are other cases, such as Vietnam and India, where legislation bars foreigners from investing in the institutions, thereby limiting the sector’s development in these countries.
The amendments made to regulatory legislation have favoured the appearance of new kinds of supervised institutions specialising in financial intermediation with microenterprises. These institutions are not subject to the same requirements as commercial banks, amongst which is the required level of minimum capital, in exchange for a limit on the possible range of operations, although they are frequently given permission to attract savings from the public. Such is the case of the Depository Microfinance Institution in Afghanistan, the Micro-credit Development Bank in Nepal, and the Microfinance Deposit-taking Institution in Cambodia.
