Global microscope on the microfinance business environment 2012

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Scoring criteria
Indicators in the Microscope index are qualitative
in nature, and defi ned through a set of questions.
These questions seek to measure not only the laws
and standards governing the sector, but also their
enforcement and implementation. The criteria are
detailed, but ultimately subjective in nature.
Consequently, scores are best understood by
reading both the scoring criteria and the written
justifi cations provided for each indicator.
For the purposes of this research, MFIs are
defi ned narrowly, as those institutions that provide
“microcredit”—that is, loans to non-salaried
workers that are typically less than or equal to
250% of gross national income per head (GNI per
head). Microcredit operations are carried out by
different types of institutions, some regulated by
fi nancial authorities and some not.
The indicators and associated scoring criteria for
Microscope 2012 are listed here.
Regulatory Framework and Practices
(1) Regulation and supervision of microcredit
portfolios: “Are regulations and supervision in the
country conducive to microcredit provision by
banks and other established fi nancial institutions?
For instance, are banks free to set market interest
rates, can they avoid excessive documentation,
and are they free from unfair competition from
subsidised public programmes and institutions?”
l Scoring: 0=No such regulations exist or
regulations are prohibitive; 1=Regulations
create serious obstacles; 2=Regulations create
at least two such obstacles for MFIs;
3=Regulations create minor obstacles;
4=Regulations present no signifi cant obstacles
(2) Formation of regulated/supervised microcredit
institutions: “Are regulations conducive to the
formation of new MFIs, including greenfi eld MFIs,
upscaling NGOs, etc?”
l Scoring: 0=No such regulations exist;
1=Regulations exist, but multiple obstacles
make formation very diffi cult; 2=Regulations
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
exist, although there are signifi cant obstacles;
3=Regulations exist with relatively few
obstacles; 4=Regulations facilitate formation
(3) Formation/operation of non-regulated
microcredit institutions: “Is the legal framework
conducive to the formation and functioning of nonregulated
microcredit institutions? Do nonregulated
institutions take deposits?”
l Scoring: 0=Unregulated institutions are barred
from offering micro-loans; 1=Unregulated
institutions face many obstacles to establishing
operations; 2=Unregulated institutions face
some obstacles; 3=Unregulated institutions face
only minor obstacles; 4=Unregulated
institutions face no signifi cant obstacles
(4) Regulatory and supervisory capacity for
microfi nance (including credit and other services):
“Do regulatory institutions possess an adequate
capacity for the regulation and supervision of
microfi nance? Is supervision truly risk-based and
not focused arbitrarily on strictly traditional
indicators (for example, collateral)? Does
regulatory capacity match or refl ect the pace of
innovation in non-traditional forms of
microfi nance that are allowed and that exist in the
country (such as insurance, mobile banking, and
remittances)? Are data on the industry collected,
and are institutional checks conducted when and
where relevant?”
l Scoring: 0=Very weak capacity to regulate or
supervise microfi nance operations; 1=Limited
capacity to regulate and supervise; 2=Some
capacity to regulate and supervise;
3=Substantial capacity to regulate and
supervise; 4=Excellent capacity to regulate and
supervise
(5) Regulatory framework for deposit-taking: “Are
regulated MFIs permitted to take deposits? Are the
regulations reasonable and not overly
burdensome? Are deposits (any type; for example,
time, sight and contractual savings) only taken by
regulated entities? Are regulations, including
know-your-client regulations/anti-money-