Towards An Enabling and Investor Friendly Microfinance Regulatory and Policy Environment

Financial inclusion forms an important element of the development agenda in the Southern Africa region. Significant strides have been made in promoting access to financial services despite the region having some of the most underdeveloped economies within the world. A number of interventions, spanning  liberalisation of  financial sectors, direct government programmes, legislative reform, and participatory and voluntary engagement from the private sector are currently in progress.

Nonetheless, access to financial services remains a significant challenge in Southern Africa when compared with other  developing parts of the world  and  further interventions are  required to address the shortfalls in financial access that still exist. Hence initiatives such as the Southern African Microfinance Project (SAMP) aims to catalyse the growth of access to financial services through the development of microfinance.

Why SAMP?

This project aims to address the challenges of the microfinance sector that can be addressed effectively through a common approach across a broad representation of the SADC countries. Consequently a detailed project scoping process identified the regulatory and policy environment of microfinance in the SADC region as an area requiring focus. Related to the policy and regulatory environment is the relatively low level of investment and funding that microfinance institutions in the region are able to attract from international microfinance investment funds.

Objectives of the project

  1. To promote the continued development of conducive policy, regulation and government support for the microfinance sector in SADC through agreeing and promoting relevant policy principles.

To develop an understanding of investor requirements and consequently build transparent information and capacity at a mezzo level within the SADC through collaborative learning.

Activities

Activity 1: Policy and regulation

Building consensus on microfinance  policy and regulation in SADC through regulator engagement, capacity building and assessment on regulatory environments .

Activity 2: Investment and funding

Developing  capacity  of microfinance institutions  to  attract  investors  and  access funding and to diversify client centric product offerings .

Activity 1: Policy and regulation review

Activity 1 aims to evaluate the regulatory and  supervisory  framework  of microfinance   in    a    sample    of    SADC countries and to determine which elements of these frameworks are more favourable to the development of a thriving microfinance sector. This evaluation will be mostly guided by the CGAP microfinance,  consensus guidelines, October 2012.

As there is a clear trade-off between depth and breadth in such an exercise, the proposed approach is to focus on three SADC countries that are very different in terms of regulatory approach as well as the characteristics of the microfinance sector. The proposed countries: Namibia has a thriving commercial micro-lending sector and a solid regulatory framework, with a strong focus on consumer protection.

Tanzania, has seen the development of a more classical, enterprise focused microfinance sector which includes NGOs, SACCOs and Microfinance Banks. As a result, the regulatory framework focuses more on the prudential requirements for these institutions.

Zambia combines both classical microfinance and a growing consumer lending sector. Recent changes in the legal and regulatory environment have occurred in an attempt to regulate this.

Activities 2 & 3: Investments & products development

Develop capacity of microfinance institutions to attract investors and access funding and to diversify client centric product offerings . This will be achieved by:

  • Develop a listing of private and public sector investors for the microfinance sector in the region.
  • Engage microfinance investors and other relevant stakeholders to identify key criteria and requirements for investment and inform the development of an information gathering and assessment tool for MFIs.
  • Prepare a gap analysis between funder requirements and MFIs to inform future capacity building in the region through a collaborative approach.
  • Hold two regional workshops with investors and MFIs to share the results on the gap analysis and how to improve their investor preparedness
  • Deliver training to MFIs on client centric product diversification and improve investor attractiveness.

Implementation Partners

MicroFinance South Africa

PlaNetFinance

For further details on this project please contact: bchongo@planetfinance.org