Global microscope on the microfinance business environment 2012

48
network and adoption by some institutions of best-
practice international norms are growing and hold
promise for improvements in the future.
Key changes and impacts since last year:
l The banking superintendency has issued new
regulations regarding electronic and mobile
banking and non-banking correspondents, as part
of its new focus on fi nancial inclusion.
l The large co-operative sector remains in
regulatory limbo (and in the view of some, an
element of systemic fi nancial risk); initiatives to
bring co-operatives under prudential regulation
have not yet achieved passage.
l “Know your client” provisions and other strict
requirements of anti-money laundering laws
continue to burden fi nancial inclusion efforts by
making it extremely diffi cult and cumbersome to
open new accounts. As a result, current proposals
by the banking superintendency to create
simplifi ed accounts take on additional urgency.
l Two new second-tier funding trusts focused on
microfi nance were approved and went into
operation in 2011. Both funding trusts on-lend
based on technically sound criteria and with access
by all types of organisations meeting these criteria:
FINDEC or Fideicomiso para el Financiamento de la
Competividad y la Productividade (under the
Ministry of Commerce and Industry) and FIDEMICRO
or Fideicomiso de Microcrédito de Panamá (under
the Autoridadad de Micro, Pequeña y Mediana
Empresa, or AMPYME).
■ Paraguay
Key characteristics of the microfinance business
environment:
l The regulatory environment is conducive to
microcredit provision by banks and fi nance
companies, including those that have upgraded to
such status. The usury cap on interest rates is
permissively high to permit profi tability, and
direct, state-subsidised fi rst-tier competition in
micro-lending is very limited in practice.
l Specialised regulatory and supervisory capacity
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
for microfi nance on the part of the Banco Central
del Paraguay (BCP, the Central Bank) is modest but
has been growing in recent years.
l Paraguay has a moderately effective credit
information system. A public credit registry is
restricted to and for regulated institutions, while
an established private bureau is available to and
utilised by nearly all institutions in the sector with
mostly negative information. Both have fairly good
population coverage by regional standards.
Key changes and impacts since last year:
l Based on accumulated evidence of relative ease
and transparency of upgrading in recent years,
relatively low barriers to entry, and positive
regulatory moves, the score for formation of
regulated/supervised fi nancial institutions has
been upgraded. Finance companies have been able
to undertake the transformation to banks,
exchange houses to fi nance companies, as well as
one group of co-operatives into a bank.
l While the BCP requires monthly publication of
interest rates by regulated institutions, in reality
the effective rates, including commissions and
other fees, are not clearly disclosed.
l Consumer protection offi ces do exist, but most
are general purpose and not equipped for fi nancial
and microfi nance matters. Moreover, a lack of selfregulation
in this area has led to underdeveloped
dispute resolution mechanisms.
l Some pending legislative proposals regarding
interest rates and a recent executive action
overruled by a Supreme Court decision regarding
centralisation of public sector assets create an
environment with some degree of political
uncertainty, even though the main fi nancial
regulators have resisted such political moves.
■ Peru
Key characteristics of the microfinance business
environment:
l The principal regulator of microfi nance in Peru,
the Superintendency of Banking, Insurance, and
Pension Funds (SBS), has implemented regulation