This document looks at the issues surrounding regulation and supervision of MFIs seeking to offer savings services and insurance services. The article highlights the convention required by central banks to design and administer regulation and external supervision systems under which MFIs operate in order to offer state-backed deposit insurance.
The paper outlines theoretical framework within which regulation and supervision has traditionally been conceptualised. It examines the short-comings of conventional approaches and looks at what happens when theory collides with practice. It also looks at some of the alternatives that have been proposed by microfinance specialists thinking beyond the conventional approaches, and why these approaches are important for poor around the world.
The paper concludes with a personal view on how different types of MFIs might be supervised.