P
ulatory framework for microfinance is incipient and not yet well-defined.
Background This publication is the product of a two-year research project that brought together some of the most renowned experts on microfinance in Latin America. During 2000 and 2001, the project financed research in four countries — Bolivia, Colombia, Paraguay, and Peru—which were chosen based on the characteristics of their microfinance markets and the sophistication (or lack thereof ) of their regulatory frameworks in relation to microfinance. Bolivia and Peru are similar in that their microfinance markets and regulatory frameworks are relatively mature and have been firmly in place for the last eight or nine years. They have a significant number of financial institutions specialized in microcredit that are supervised by the agency in charge of supervising banks and other financial institutions. They can be distinguished in that Peru’s framework is more open and plays more of a promotional role than Bolivia’s. As a result, Peru has more than 30 regulated institutions specialized in providing microcredit, whereas Bolivia has five. In both countries, these regulated microfinance entities, which grew out of nonprofit foundations, dominate the supply of microcredit in their countries. Colombia and Paraguay also have large microfinance markets, but their markets differ from one another and from those in Bolivia and Peru. In Colombia, the microfinance market is dominated by nonprofit organizations, and there are only two supervised financial institutions specialized in microcredit. In Paraguay, the market is dominated by supervised financial institutions that have entered the sector after having experienced a decline or increased competition in their tradtional markets (consumer and/or commercial loans for small and medium clients). In both cases, the reg-
Preface
In order to examine the topic of microfinance regulation and supervision more broadly, this publication includes an analysis of credit unions, which are important providers of financial services (including microcredit) for middle- and lowincome populations in the region. The supervisory context for credit unions varies among the four countries. In Bolivia, credit unions are supervised by the banking supervisor. In Colombia, the bank supervisor is in charge of large credit unions, while another specialized government agency handles the rest. In Peru, the bank supervisor has delegated the daily supervisory tasks to the credit union federation. Finally, in Paraguay, credit unions are unsupervised, although the central bank recently approved a resolution for the bank superintendency to supervise the largest ones. In addition to the in-depth case studies of regulation and supervision of microfinance in these four countries, the project sponsored a region-wide survey to broaden the information base for this publication. The results of this survey are interspersed throughout the publication and provide a regional perspective on various regulatory and supervisory topics. A total of eight consultants were hired to support the IDB in this project, several of whom had previous experience as bank supervisors. Throughout the period, the IDB and the consultants had the full cooperation of the supervisory authorities in the case study countries, which contributed significantly to the endeavor in the form of time and effort of their personnel. The publication builds upon the accumulated knowledge and experience of this group of professionals, many of whom are today considered among the foremost experts in the regulation and supervision of microfinance.
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