Regulatory Environment: The Jordanian Experience

This paper presents the policy constraints that microfinance institutions (MFIs) have to face in Jordan. The author states that constraints could fall under three categories:

• Regulatory constraints such as:
  • Special laws for subsidized credit;
  • Lack of standardized structures for MFIs.
• Legal constraints in enforcing contractual claims;
• Financial constraints.

The paper also presents some of the advantages and disadvantages of regulation and commercialization of microfinance. The advantages include increase in:

• Access to capital;
• Operating efficiency;
• Credibility and better client service.

However, increasing regulations may lead to higher direct and indirect costs, while commercialization may lead to MFIs drifting away from their social objectives. Finally, the paper calls for mainstreaming microfinance by overcoming policy constraints in order to realize the full potential of the microfinance industry by:

• Mobilization of available resources;
• Drawing on regional and global experiences;
• Advocacy.