1. Regulation of Microfinance – a level playing field for All microfinance providers Mark Bienstman - senior adviser WSBI UN DESA panel discussion New York, 10 April 2007

2. overview  Introduction: put the topic in perspective  Regulation: some specific concerns from Savings Banks

3. Introduction  Before we start : what is the reality in the field ? * > 10.000 MFI’s * < 1.000 are +/- sustainable (Mix db) * > 9.000 (very) small structures with (very) limited resources * limited resources at the level of national regulators/supervisors as well.

4. In practice:  don’t regulate if you cannot monitor (avoid creating costs with no added value)  limit the number of players you need to monitor. HOW ? a) «killing» the (very) small? NO - they have added value in the A2F process b) «push » to achieve scale? YES

5. HOW to achieve scale in microfinance ?  Internal growth (-> slow process)  M & A (-> different «roots» -> NGO)  Create a national association/Federation including a «central» bank – cfr Mexico/Bansefi and El Salvador/Fedecrédito  («light») cooperation agreements with bigger (regulated) Institutions (make a clear split between «distributing» and «managing» financial products)

6. Regulation: specific concerns from Savings Banks  Microfinance goes beyond MFI’s  Allow for a «pluralistic» financial sector  Keep coherence between different government policies  Regulation in line with the risks  Regulation of ALL financial players  Allow «one stop shopping»

7. Microfinance goes beyond MFI’s  Microfinance is more than microcredit  Microfinance is offered by a broad range of financial institutions and intermediaries, so regulations should cover all these.  A specific regulation for microfinance can be indicated, but not a specific regulation for MFI’s.

8. Regulation -> PLURALISME support a «pluralistic» financial sector (to allow choices for the customer): * NGO (-> MFI’s) * cooperatives and/or credit unions: members owned organisations * state-owned (retail and/or savings) banks: stakeholders driven * commercial banks shareholders driven * ….

9. Regulations -> COHERENCE facilitating general access to finance requires coherence with other national policies:  such as development policy - rules on KYC – AML – FATF.…  But also with budgetary policies: conflict of interest between A2F (i.e. Via Postal Savings Banks) and reduction of public spending (i.e. In the Postal area)

10. Regulation -> RISK DRIVEN  «the more risks, the more regulation»  There is a difference for:  savings (deposit taking)  credit or lending (where is the funding coming from?)  payments services (retail versus institutional)  insurance (pm)

11. Regulation -> WHO ?  All financial institutions should be regulated and supervised by financial specialists (i.e. Ministry of Finance - Central Bank - Banking Commission...)  same business -> same risks -> same rules  NOT by departments in charge of:  PTT (cfr the Postal Savings Banks)  Cooperatives (cfr credit unions)  …

12. Regulation and «one stop shopping»  Today a lot of Savings Banks are «savings only»:  no credit (all funding is for public finance) best allocation of resources ?  no cross-selling -> no «one stop shopping»  no payments services (current account - payment cards ) -> difficult to handle remittances !  no access to national interbank payment and/or clearing and settlement system(s)  no fair competition…..

13. Conclusion ? By all means, avoid «crowding out»:  At the level of the customer: regulation should promote (not kill!) easy access to finance;  At the level of the microfinance providers: regulation should create a level playing field for ALL providers, regardless of their legal status - regardless of their ownership structure – regardless of their size - …

14. THANK YOU !