The Rush to Regulate: Legal Frameworks for Microfinance

April, 2000     Robert Peck Christen, Richard Rosenberg

This paper discusses a wide range of issues concerning regulation of microfinance and presents a range of alternative mechanisms for supervision. Although the authors contend the future of microfinance lies in a licensed setting, they urge caution with respect to the timing of regulation and expectations of its impact. While motivations for regulating microfinance are varied, the authors argue that the costs are generally underestimated and the benefits overestimated. The cautionary overall message of this paper is not meant to question the importance of microfinance regulation and supervision. Rather, we are raising questions about timing, and about certain expectations that may turn out to be inflated.