Microfinance Banana Skins 2009 Microfinance Banana Skins 2009 - Le ...

More documents

Recommendations

Info

C S F I / New York CSFI13. Inappropriate regulation (3)This is a risk that comes in many forms. Depending on who you are and where youare, there is either too much regulation or too little, it is either ineffective oroppressive. But broadly the sense seems to be that regulation is getting there, ifslowly. This Banana Skin is slipping down the rankings, and is not considered to begetting worse.Microfinancecould be hit bythe regulatorybacklash againstbanksThe category of respondents which is most concerned about this risk arepractitioners who ranked it No. 8 and investors (No. 9). Analysts, by contrast, weremuch less worried, ranking it No. 19. Regulators ranked it No. 21. Geographically,concern was strongest in the Middle East (No. 5) and Latin America (No. 9).The concern most frequently cited by respondents is that many countries still lackspecific MF regulation, which means that MFIs are either unregulated, or forced toconform to other, mainly commercial banking, regulation. This is a particular issuefor deposit-taking, an activity that more MFIs want to get into. The wrong regulationcan affect the viability of the business model, undermine depositor and investorconfidence, and expose MFIs to political interference.Martin Holtmann, head of the microfinance unit of the IFC, said that inappropriateregulation “prevents many mature MFIs from raising deposits”. Dieudonné Gnanvo,director of RENACA, the Benin savings bank network, said that “new West Africanregulations do not conform to the realities on the ground, and could introduce newconstraints on the development of the sector”.Another aspect of the risk is the poor quality and ineffectiveness of regulation. Oneexample is China where, according to Chengyu Bai, secretary-general of the ChinaAssociation of Microfinance, the lack of a suitable regulatory framework means thatMFIs flout the law, raising deposits without authority, and focus on business lendingrather than microcredit. “This is distorting the industry”, he says.In Bangladesh, Muhibur Rahman, senior assistant secretary at the Ministry ofFinance, said that the authorities lacked the capacity to regulate properly. “The weakregulatory mechanism could result in a fragile financial market with moneylaundering and financial crime becoming uncontrolled”. Jules Gbato Gonnet,microfinance regulator in the Côte d'Ivoire, said that “microfinance innovates morerapidly than regulation”.Unless regulators have the will power tocome up with conducive, friendly andwater tight regulations, the industry willbe in a major war, pitting itself againstthe established commercial banks.Darius NjengaProgramme coordinatorINAFI Africa Trust, KenyaAn ongoing issue is “transformation”,the transition of MFIs from unregulatedto regulated status, a process which cancause disruption and uncertainty.Voluntary transformation is increasingas more MFIs seek to grow and takedeposits, a trend which has broughtthem into competition with commercialbanks in many countries. Enforcedtransformation, notably in the Balkans, continues to cause serious problems for MFIsin Bosnia & Herzegovina.Overshadowing all this is the worry that microfinance could get swept up in aworldwide move to re-regulate the financial system in the wake of the crisis. Thiscould lead to hasty, ill-thought out measures. Carlos Labarthe, co-chief executive28 CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk
C S F I / New York CSFIofficer of Compartamos in Mexico, said that the financial crisis “is generating a lotof efforts by regulators to increase regulation for financial institutions in general, sothe possibility that this will affect our operations is huge”. Bob McDowall researchdirector at TowerGroup saw MFIs “being caught in the slipstream of excessive andundeserved additional financial regulation intended for mainstream financialinstitutions that will erode margins and make some areas of business uncompetitive”.On the other hand, a number of respondents said that regulation was improving. Acredit analyst in Peru said that regulation in that country was “very appropriate”.14. Staffing (5)Concerns about staffing, which loomed large in the 2008 survey, seem to be easing.This Banana Skin has fallen very sharply in the rankings, and is seen to be on adeclining trend.Staffing risks areseen to bedecliningOne reason could be that the huge amount of resource that has been applied tostaffing is beginning to pay off. Another is that the recession has eased staffshortages, and a third is that MFIs who transform themselves into banks are oftenable to offer more interesting and better paid jobs.Geographically, the risk remains most acute in Africa, which ranked it No. 2, and theFar East (No. 6). A respondent from Kenya said: “Human resource development is amajor concern for the industry. The development of skills is probably not keepingpace with the development of the sector – at least in Kenya”.Among respondent categories, the biggest worries lay with deposit-taking MFIs whoplaced it No. 10. Sadaffe Abid, chief executive of the Buksh Foundation in Pakistan,said that “most MFIs lack management depth to grow and expand their business.They are usually dependent on a few individuals. MFIs need to have strongleadership development initiatives and systems in place”. Investors seemed to be lessconcerned. “It’s becoming easier” said an MF funder in the Netherlands.The talents in shortest supply are loan officers and risk managers. Staff isparticularly short in MFIs away from towns and those without automated systems. ACSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk 29
Page 1: MicrofinanceBanana Skins 2009Confro
Page 4 and 5: CSFI / New York CSFI E-mail: info@c
Page 6 and 7: C S F I / New York CSFISponsors’
Page 8 and 9: C S F I / New York CSFIThe response
Page 10 and 11: C S F I / New York CSFIMFIs lookvul
Page 12 and 13: C S F I / New York CSFIrefinancing
Page 14 and 15: C S F I / New York CSFIRegulators -
Page 16 and 17: C S F I / New York CSFIWest EuropeB
Page 18 and 19: C S F I / New York CSFIAsiaBiggest
Page 20 and 21: C S F I / New York CSFINewly aware
Page 22 and 23: C S F I / New York CSFIIn Latin Ame
Page 24 and 25: C S F I / New York CSFI5. Refinanci
Page 26 and 27: C S F I / New York CSFIHowever, vir
Page 28 and 29: C S F I / New York CSFIThe problem,
Page 30 and 31: C S F I / New York CSFIMicrofinance
Page 34 and 35: C S F I / New York CSFIUS academic
Page 36 and 37: C S F I / New York CSFIPaul Blyth,
Page 38 and 39: C S F I / New York CSFISome respond
Page 40 and 41: C S F I / New York CSFISome respond
Page 42 and 43: C S F I / New York CSFIPreparedness
Page 44 and 45: C S F I / New York CSFIQuestion 2.
Page 46 and 47: C S F I / New York CSFI11. Interest
Page 48 and 49: 25. “The Crash of 2003: An EMU fa
Page 50: 73. “Banking Banana Skins 2006”

Microfinance Banana Skins 2009 Microfinance Banana Skins 2009 - Le ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?