Framework on Microfinance

1

Activities:



Grants



Borrowings



Deposits

Activities:



Loans



Lease financing



Deposits



Collateral interest

Impact of Legal and Regulatory
Framework on Microfinance

Donors, banks, and
general public

Small and

micro enterprises

Microfinance

institutions

2

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral


Establishment procedures


Regulations on operations
as financial institutions


Accounting standards and
procedures


Tax laws and regulations


Securities law


Legal framework for
ownership and security
interests

3



Establishment Procedures:


Recognition as legal entity


Reporting requirements


Bankruptcy law and
procedures

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

4


Regulations on Operations as
Financial Institutions:


Doing banking business, making loans,
taking deposits
-

Licensing as bank or
specialized financial institution


Minimum capitalization, governance
and other barriers to entry


Risk
-
based prudential supervision


Reporting requirements


Participation in clearing and payment
systems


What regulatory policy
should recognize:


(i) Types of MFIs

in the continuum,
and
(ii) threshold levels of activities

that trigger need for regulation or
supervision

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

5



Accounting Standards and
Procedures:


Internal and MIS reports


External reports and audited
financial statements


Tax returns and reporting

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

6



Tax Laws and Regulations:


Provisioning expense and loan
write
-
offs


Leasing law
-

depreciation
expense and tax treatment


Cascading taxes on financial
transactions

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

7



Securities Law:


Blanket assignment of
receivables


Creation and issuance of
financial securities


Registration of security
issues

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

8



Legal Framework for
Ownership and Security
Interests:


Documentation and
registration of ownership
rights


Creation and enforcement of
security interests


Foreclosure laws

Impact of Legal and Regulatory Framework on Microfinance

Donors, banks, and
general public

Small and micro
enterprises

Microfinance
institutions

Activities:


Grants


Borrowings


Deposits

Activities:


Loans


Leasing


Deposits


Collateral

9

Impact of Legal and Regulatory Framework on Microfinance

COLLATERAL

Formats and

Instruments

Personal

Guarantee

Assignment

for

Security

Pledging or

Pawning

(perfected

security interest)

Chattel Mortgage

(attached

security interest)

of

Claims and

Rights

of

Movable

Property

of

Real

Property