ZAMBIA: Thesis on Regulation of Microfinance Institutions

A thesis analyzing the potential impact of regulation on MFIs.

In her thesis, Chiara Chiumya uses Regulatory Impact Assessment to assess the potential impact of regulating microfinance institutions in Zambia. The author’s abstract follows:

The aim of the research is to contribute to the understanding of regulatory and supervisory issues in relation to microfinance in order to inform the design of regulatory policy in Zambia, and other developing countries in sub-Saharan Africa. This thesis provides a critical evaluation of the potential impact of regulation on microfinance institutions, using the Zambian case.

The analysis is done at two levels, micro and macro. At the micro level, the potential impact of regulation and supervision on the three microfinance institutions licensed by the supervisory authority during the period of the study is evaluated. At the macro level, the analysis is extended to the entire microfinance sector using Regulatory Impact Assessment (RIA).

One main finding of the study is that the regulation of the microfinance sector at the current stage of development would have a detrimental effect on the development of the sector. Moreover, the evidence suggests that the objectives for regulating the sector are unlikely to be met. The evidence also suggests that the costs of compliance would be considerable and would outweigh any potential benefits that would be gained. Consequently, the introduction of microfinance specific regulations would most likely result in regulatory failure. The study thus concludes with the recommendation that the current existing regulatory framework be maintained.

The document is available here.