Global microscope on the microfinance business environment 2012

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requirements, MFIs can be established by either
three domestic or foreign natural persons, or by
one domestic or foreign legal entity.
l There is a difference between the two entities
and regulations regarding the microcredit
institutions, especially related to lending ceilings.
The main regulatory constraint remains the overall
size of loans, which is set at a maximum €6,400 for
an MCF and a maximum €32,000 for an MCC. These
lending ceilings are in place in both regional
jurisdictions. The diffi culty for microlenders
operating in BiH is related to the challenges of
transforming from an MCF to an MCC.
l Despite improvement in traditional supervision,
little has been done to adapt regulatory practices
to innovative and non-traditional forms of
microfi nance. Mobile banking, remittances and
insurance products have not yet been considered
new product areas that require new regulations,
largely because of the lack of demand from MCOs.
Key changes and impacts since last year:
l Since 2011, greater supervision via fi eld visits
and online transparency of the micro-fi nancial
institutions by regulators has been noted, where
the microcredit institutions are obliged by the Law
on Microcredit Organisations of the RS and the Law
on Microcredit Organisations in BIH to disclose
their effective interest rates and their service fees
transparently to clients and the regulator.
l Improved availability of client debt information
as a result of the daily update of the central credit
bureau. There are two credit bureaus: one is private
and the other was established by the Central Bank.
The state-run credit bureau is very comprehensive
and includes all credit data for the entire country.
Financial institutions thus have a good overview of
the number of loans and amount of debt carried by
a potential client.
l The dispute resolution system has been
improved since 2011, owing to the fact that in the
RS there is an ombudsman for fi nancial services. As
of mid-2012, the legislation introduced the same
function within the respective Banking Agency in
BiH. Besides this, the banking agencies at entity
levels also require microcredit institutions and
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
banks to establish an internal resolution system for
complaints and suggestions, as well as form
committees for complaints.
l On May 15th 2012, the Banking Agency of the
Federation of Bosnia and Hercegovina adopted a
Decision on Minimal Standards for activities of
microcredit organisations related to prevention of
money laundering and fi nancing of terrorist
activities, which now forces the microcredit
organisations to have adequate administrative and
supervision procedures related to these activities,
as well as to categorise their clients by risk. This
requires introduction of new administrative
procedures for microcredit organisations and
increases their administrative costs. In addition,
the decision requires that microcredit clients must
deliver proof of employment, which could
potentially reduce the number of microcredit
clients given that many clients have been
unemployed individuals.
■ Georgia
Key characteristics of the microfinance business
environment:
l Funding for small microfi nance organisations
(MFOs) remains an issue owing to a volatile
macroeconomic environment and fi erce
competition with banks.
l The environment is conducive for organic
growth with effi cient legislation and healthy
demand within the microlending segment.
l Disclosure of interest rates is still poor, with
little regulatory pressure for lenders to display
hidden costs.
Key changes and impacts since last year:
l MFOs, which have many local investors, are
increasingly viewed as deposit-takers. The
regulator has begun investigating MFOs with more
than 400 individual, local investors on the grounds
that this amounts to deposit-taking.
l A broader defi nition of collateral has helped
microentrepreneurs to access credit. However,
strict provisioning laws on unsecured lending