MICROFINANCE REGULATION IN JORDAN: A COMPARATIVE PERSPECTIVE WITH MENA COUNTRIES AND OTHER AREAS

Nahil Saqfalhait

Applied Econometrics and International Development, 2011, vol. 11, issue 1

Abstract: Due to the expansion of microfinance institutions? (MFIs), it has been increasingly recognized that MFIs activities need to be brought under the financial sector?s regulatory framework. In many countries, this framework is underdeveloped, in others partially applied. To ensure a fully informed policymaking process, it is important to examine the lessons of experience from the countries that have begun to address the legal and regulatory framework for microfinance. One can learn from good practice as well as from misguided practice. This paper aims to provide the necessary comparative data and analysis to support sound regulatory policy for MFIs in Jordan. When it comes to regulating MFIs, one needs to keep in mind the differences between these institutions as a group, on one hand, and the existing regulated institutions on the other hand. Some opinions suggest that institutions which do not take savings do not justify regulation. However, many countries do regulate credit-only institutions, and indeed the need for transparency, market stability, and control of unfair practices suggests that some regulation is often needed. Regulation and supervision need to be targeted in such a way that their benefits in terms of depositor protection and the safety of the financial system generally outweigh the costs and risks involved. This inevitably means that only certain classes of institutions receive full regulation, while others face less strict control, and some will not be regulated at all. This paper concludes lessons to policy makers in the field of regulation of MFIs in Jordan to attain the final goal of expanding access to financial services for the benefit of poverty reduction and economic development.

Date: 2011
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