Policies, Regulations and Systems That Promote Sustainable Financial Services to the Poor and Poorest

The paper summarizes research findings and case studies in order to understand what poor women want in microfinance services. This is seen as the necessary foundation for building pro-poor, pro-microfinance policies.

Emphasizes the importance of microfinance networks, wholesalers, rating agencies and others in building systems to monitor performance using common indicators and definitions and recognises that the majority of microlending institutions are likely to remain unregulated.

Highlights the key features of policy and regulatory change that will be needed to help ensure sound, responsive microfinance operations as well as key features in the available legal structures for those microfinance institutions that wish to become commercial, regulated legal entities.

Offers the following conclusions:

• Listening to the needs of poor clients and the institutions that serve them needs to shape the policies and regulations for microfinance;
• Policy environment that responds to the financial services that poor people want;
• Microfinance needs to be recognized as a vital part of the financial system, dedicated to meeting the financial needs of poor clients in a responsive and financially sustainable manner;
• Shared performance standards, transparency and accountability are key to building solid and responsive services for poor households for both regulated and unregulated microfinance institutions;
• Emphasis needs to be given to introducing changes that reflect the needs of microfinance operations;
• Prudential regulation is needed for those specialized MFIs that seek to mobilize savings from the public;
• For the small but important subset of specialized MFIs that seek to become regulated financial institutions, new legal structures may be needed, or existing legal structures adapted;
• Policies, regulations, and support services need to be designed to respond to each country context.