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Theme 5: The Impact of Regulatory Policies on Provision of Financial Services to the Poor

The provision of micro-finance services in most countries has been by NGOs outside the purview of regulatory mechanisms. Some would even argue that micro-finance works better without regulation and that perhaps the sector is best left outside the purview of regulatory mechanisms. Others argue differently and feel that the long-term growth of the sector can only be achieved within a regulatory framework. Regardless of this debate, increasingly, micro-finance services are coming within the purview of regulation. As such, the impact of regulatory policies on the provision of micro-finance services to the poor is an issue which is gaining in importance. This paper assesses the strengths and weaknesses of the existing legal framework for micro-finance and how this enhances or hinders access to the poor. A principal objective of the current review was to identify some of the legal drivers that are necessary for the growth of the sector and to assess the extent to which the current framework provides an environment under which the sector can grow and additional measures that could be undertaken in support of the sector. While this paper looks at issues internationally it focuses particularly on the regulation in Pakistan.