Category: Regulation

MICROCAPITAL BRIEF: Pakistan’s National Rural Support Program (NRSP) Microfinance Bank Receives Permission to Operate as Regulated Entity

The State Bank of Pakistan (SBP), the nation’s central banking authority, has granted a “business commencement certificate” for the nonprofit National Rural Support Program (NRSP), to operate its NRSP Microfinance Bank as a regulated microfinance institution (MFI) in all areas of Pakistan. NRSP has offered microfinance services on a self-regulated basis since 1991. In 2008, NRSP internally approved the transformation of these operations into a regulated microfinance bank, which was registered and licensed as NRSP Microfinance Bank in 2009 [2].
Continue reading

Share

MICROCAPITAL BRIEF: India’s Business Standard Supports Reserve Bank of India (RBI) Proposal to Establish Two Types of Banking Licenses

The Business Standard, an Indian financial newspaper, recently extended its support of the introduction of two types of licenses for banks in India: one for basic banking services to serve the purpose of financial inclusion and the other for providing a full-range of banking services such as is offered by commercial banks. The proposal comes as the Reserve Bank of India (RBI) is reviewing draft guidelines that would bring additional entities such as industrial houses into the banking sector. RBI reportedly proposed provision of “full banking license” to industrial and business houses and some non-banking finance companies (NBFCs). A basic banking license would be issued to other NBFCs and nonprofit microfinance institutions (MFIs) [1]. How NBFCs would be divided between the groups was not specified. Continue reading

Share

MICROCAPITAL BRIEF: Central Bank of Nigeria (CBN): No More Time For Microfinance Banks (MFBs) to Recapitalize

The Central Bank of Nigeria (CBN) recently announced that it will not allow 121 microfinance banks (MFBs) that received provisional operating licenses in October 2010 more time to recapitalize. CBN gave the 121 MFBs, the surviving portion of 224 MFBs that had their operating licenses revoked in October 2010, a deadline of January 31 to increase their minimum capital from NGN 10 million (USD 64,200) to NGN 20 million (USD 131,000), shutdown branches engaging in illegal activities and embrace “good” corporate governance. Continue reading

Share

MICROCAPITAL BRIEF: State Bank of Pakistan (SBP) Announces Launch of $16m Financial Innovation Fund, Support for Mainstreaming Microfinance into Formal Banking System

State Bank of Pakistan (SBP), the central banking authority in Pakistan, recently announced its launch of a GBP 10 million (USD 16 million) “Financial Innovation Fund” that aims to encourage innovations in financial products and delivery channels for financial services.

Continue reading

Share

MICROCAPITAL BRIEF: Indian Budget Plans Include Partnering with Small Industries Development Bank of India (SIDBI) to Create $22m India Microfinance Equity Fund

The Indian government began review of a draft 2011-2012 budget, which reportedly includes a partnership with the Small Industries Development Bank of India (SIDBI), a government-owned bank providing credit to microfinance institutions, to allocate funds totaling approximately INR 100 crore (USD 22 million) to traditionally underserved groups via a newly established India Microfinance Equity Fund. Continue reading

Share

MICROCAPITAL BRIEF: Federal Microfinance Bill May Replace Existing State Microfinance Legislation in India

The Ministry of Finance in India recently unveiled its plan to pass a new microfinance bill to regulate the microfinance sector. The ordinance passed by the government of the Indian state of Andhra Pradesh in October 2010, in response to a series of farmer suicides, severely curtailed lending activity in the region. The bill, which is reportedly being drafted along the lines of the recommendations made by the Reserve Bank of India’s Malegam Committee which was formed in the wake of the unrest in Andhra Pradesh, is likely to render state legislation on microfinance null and void. Continue reading

Share

MICROCAPITAL BRIEF: Philippines Looks to Curtail Direct Microfinance Lending by Government Agencies

In an effort to counter political patronage, the administration of Philippine President Benigno Aquino III has indicated its intention to alter current microfinance policies, which confer power to government agencies to lend directly to poor people. Continue reading

Share

MICROCAPITAL BRIEF: India’s Andhra Pradesh State to Tighten Local Microfinance Institutions (Regulation of Moneylending) Act

The government of the Indian State of Andhra Pradesh reportedly is set to alter the Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, which was enacted December 2010 in response to complaints of high interest rates and coercive loan recovery, by replacing the term “self-help group (SHG) women” with “below poverty line (BPL) households” [1] [2]. According to unspecified sources at the Andhra Pradesh Chief Minister’s Office, the purpose of the replacement is “to ensure that MFIs adhere to the existing stringent rules” by “bringing all kinds of MFI loan products, existing and future, under the purview of the Act [1].” Continue reading

Share

MICROCAPITAL BRIEF: Microcredit Summit Campaign Releases State of the Microcredit Summit Campaign Report 2011, Reports 128m Poor People Received Microfinance Loans in 2009

The Microcredit Summit Campaign, a project that was launched in 1997 by US-based nonprofit advocacy group RESULTS Educational Fund (REF), recently released the State of the Microcredit Summit Campaign Report 2011, a plenary account of the recent trends, challenges and achievements in the microfinance industry, at the National Press Club in Washington, DC. The report indicated that 128 million poor people received microloans in 2009, more than was recorded in any of the organization’s previous reports. In 1997, 7.6 million were estimated to have received microloans. Continue reading

Share

MICROCAPITAL BRIEF: Bangladeshi Court Confirms Central Bank Decision to Remove Dr Yunus as Managing Director of Microfinance Institution (MFI) Grameen Bank

The Bangladesh High Court ruled on March 8, 2011, in favor of the effort by Bangladesh Bank, the central bank of Bangladesh, to remove Nobel laureate Dr Muhammad Yunus from his position as managing director of Grameen Bank, a Bangladeshi microfinance institution (MFI) that manages total assets of USD 1.4 billion as of 2009. Continue reading

Share

MICROCAPITAL BRIEF: Nigerian Microfinance Bank Classic Microfinance Ordered to Sell Assets to Pay Debts to Former Depositors

Abeokuta-based microfinance bank (MFB) Classic Microfinance has been reportedly forced to sell off assets to pay debts it owes to its former depositors. The move is part of a broader effort in Nigeria to repay depositors of over 100 MFBs—including Classic Microfinance—whose licenses were permanently revoked in 2010 after being deemed “terminally distressed and technically insolvent.” Continue reading

Share

MICROCAPITAL BRIEF: Central Bank of Nigeria (CBN) Directs Microfinance Banks to Adopt Technology and Shared Service Platforms, Hints at New Microfinance Policy Framework

The Central Bank of Nigeria (CBN) recently mandated that microfinance banks (MFBs) adopt information technology infrastructure and utilize shared service providers—organizations that provide services such as cash processing and currency sorting for multiple banks—by June 2011 as concerns over struggling MFBs persist. CBN reportedly will offer financial assistance to MFBs to facilitate compliance with the directive. Use of the shared service platforms is also expected to help MFBs reduce operating expenses. Continue reading

Share

MICROCAPITAL BRIEF: Eagle Flight Microfinance Bank Attempts to Reassure Clients After Mistakenly Being Included in List of Failed Nigerian Microfinance Banks (MFBs)

Eagle Flight Microfinance Bank, a financial institution licensed with Central Bank of Nigeria (CBN) and based in the city of Warri, reportedly was mistakenly included in a 2010 list of over 100 microfinance banks (MFBs) whose licenses were to be revoked by CBN. A week after the list of banks who could not repay debtors was released, CBN discovered that Eagle Flight Microfinance Bank was included in the list in error. In an effort to restore confidence in the bank, Eagle Flight hosted a party celebrating its fifth anniversary during which it gave away various gifts to clients including vehicles, plasma televisions, dining sets, electric generators and refrigerators. Continue reading

Share
Written by Comments Off on MICROCAPITAL BRIEF: Eagle Flight Microfinance Bank Attempts to Reassure Clients After Mistakenly Being Included in List of Failed Nigerian Microfinance Banks (MFBs) Posted in Africa, Regulation, Risks

MICROCAPITAL BRIEF: International Association of Microfinance Investors (IAMFI) Releases Report “Charting the Course: Best Practices and Tools for Voluntary Debt Restructuring in Microfinance”

The International Association of Microfinance Investors (IAMFI), a US-based NGO, recently released a report, “Charting the Course: Best Practices and Tools for Voluntary Debt Restructuring in Microfinance”, that aims to develop guidelines for debt restructuring for microfinance institutions (MFIs). Continue reading

Share
Written by Comments Off on MICROCAPITAL BRIEF: International Association of Microfinance Investors (IAMFI) Releases Report “Charting the Course: Best Practices and Tools for Voluntary Debt Restructuring in Microfinance” Posted in Key Players, Regulation, Transparency, Trends/Challenges

MICROCAPITAL BRIEF: Yunus Continues as Grameen Bank Managing Director after Bangladesh Bank Asks Him to Step Down

Bangladesh Bank, the central bank of Bangladesh, has reportedly attempted to remove Nobel laureate Dr Muhammad Yunus from his position as managing director of Grameen Bank, a microfinance institution (MFI) based in Bangladesh in which the government holds a 25-percent stake. Continue reading

Share

MICROCAPITAL BRIEF: Vikram Akula of SKS Microfinance Views Recommendations of Reserve Bank of India (RBI) Malegam Committee as Boost to Microfinance

Vikram Akula, chairman of SKS Microfinance, a for-profit microfinance institution (MFI) in India, has stated that the recommendations released by the “Malegam Committee” of the Reserve Bank of India (RBI) in response to unrest in microfinance in the Indian state of Andhra Pradesh, would give a boost to the microfinance sector by further encouraging bank lending to MFIs. Mr Akula also stated that the proposed microloan interest rate cap of 24 percent would not impact SKS Microfinance as its lending rate falls below the cap, but that it would impact smaller institutions that are yet to achieve efficiencies of scale. He viewed this recommendation as a measure to encourage consolidation within the sector. Continue reading

Share

MICROCAPITAL BRIEF: Malegam Committee Report on Microfinance Regulation in India Fails to Meet Expectations, Argues Sriram

On the website “livemint.com”, an Indian partner of the US-based Wall Street Journal, independent researcher MS Sriram presented his evaluation of the recommendations issued in response to the crisis in the microfinance sector in Andhra Pradesh by the Malegam Committee of the Reserve Bank of India (RBI). While he argues that the report has some positive aspects, he states that it largely fails to deliver. Continue reading

Share

MICROCAPITAL BRIEF: India’s SHARE Microfin Head Exceeds Limit Set by Companies Act With Salary of $1.6m

Udaia Kumar, the managing director of SHARE Microfin Limited, a non-banking financial institution in India, was reportedly paid a salary of INR 74 million (USD 1.6 million) for the fiscal year ending March 2010. The salary exceeds the limit stipulated by the Companies Act, a law which regulates the operations of firms in India. The act states that a company is not allowed to pay more than 5 percent of its net profit to a director without government permission. A significant portion of Mr Kumar’s salary comprises “sweat equity”, which are shares issued at zero cost to the recipient [1]. The 2008-2009 salary of Mr Kumar of INR 81 million (USD 1.7 million) also exceeded the limit set by the Companies Act, but Share Microfin obtained approval from the Ministry of Corporate Affairs for the surplus pay. Continue reading

Share