Microfinance Policy and Regulatory Framework: Experience and Perspective of South Asian Region: Sri Lanka, Bangladesh, Nepal and India

This paper argues that microfinance is a powerful tool in the alleviation of poverty. There is, therefore, a need for a clearly - announced microfinance policy that will be integrated with national development policies.

The paper presents the perspectives and experiences of microfinance policy and regulatory framework in the case of four countries, vis-à-vis, Bangladesh, Nepal, Sri Lanka and India. The author argues that:

• Microfinance policy has a negligible presence on national development agendas;
• The detractors of microfinance opine that it cannot reach the poorest sections of society and is therefore not a suitable tool for poverty alleviation;
• Microfinance can reach the poorest sections of society given that pre-requisites such as a conducive credit culture, market based practices and empowerment of the target group are met;
• Microfinance policy has to be aimed at instilling an attitudinal change in the poor;
• To ensure stability and viability, it is important to promote self-regulation of microfinance institutions (MFIs), checked by market discipline;
• Government regulation should be only a supplement to this approach;
• In the South-Asian region, except for Nepal, all the other countries have let MFIs govern themselves. This has proved to be a successful strategy.

The author recommends certain proactive measures to strengthen the MFI systems:

• Introduction of a separate and uniform auditing and accounting standards system;
• Management by professionals;
• A clearly specified policy statement that stresses on transparency;
• Internal resources' development from operational surpluses.