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In Africa, funders need a tailored approach
Across the world, new measures are being
introduced to combat money laundering and the financing of terrorism. Once the concern primarily of banks, governments have expanded regulations and requirements for compliance since the late 1990s. Now all financial service providers, including those working with lowincome communities, are--or will--be affected.1 As a result, the new international framework and national measures for anti-money laundering (AML) and combating the financing of terrorism (CFT) could have far-reaching effects.
Across the world, new measures are being introduced to combat money laundering and the financing of terrorism. All financial service providers, including those working with low-income communities, are—or will—be affected by these measures. This paper summarizes the implications of the international framework for anti-money laundering (AML) and combating the financing of terrorism (CFT) for financial service providers working with low-income people.
Little is known about how consumer protection might apply to financial services for the poor. As commercialization and competition increase, vulnerable borrowers may be more exposed to potentially abusive lenders. Low-income borrowers may be functionally illiterate, first-time consumers, or insufficiently informed about their rights and can be pressured into making poor borrowing decisions. Strategically, enhanced consumer protection measures can be a more constructive alternative to new or lowered interest rate ceilings. This paper discusses two primary approaches to enforcement of such measures - voluntary codes and state regulation - in the context of developing countries.
Estimating market potential and assessing regulatory obstacles
This report was commissioned by the FinMark Trust and CGAP (The Consultative Group to Assist the Poor), in order to highlight the potential demand for cross-border remittance services in southern Africa, evaluate the potential business and technological opportunities in the remittance market, identify regulatory barriers to doing business (in both financial and immigration legislation), and propose policy and regulatory changes to facilitate the development of the market.
This paper outlines the rationale for higher microcredit interest rates, the historical performance of subsidized lending, and the impact of interest rate ceilings on microfinance clients. It includes recommendations for fostering lower microcredit interest rates through competition and consumer protection without imposing interest rate ceilings.
Interest rate ceilings imposed by governments to protect poor people unfortunately often have the opposite effect. Customers do need protection from predatory lending practices and this brief offers other options governments and donors can employ.
Captured here is broad consensus on many principles of good practice in regulation and supervision of microfinance. The guidelines summarizes these principles for government regulators and others engaged in moving microfinance into the formal financial sector.
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This simple and clear summary of the increasingly complex issues in microfinance regulation and supervision includes definitions of key terms, clear guidelines, and options for donor action.
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 micro-finance are varied, the authors argue that the costs are generally underestimated and the benefits overestimated.
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