The Governance and Regulation of International Finance
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The Governance and Regulation of International Finance

  • Private Regulation series

Geoffrey P. Miller and Fabrizio Cafaggi

This thought-provoking book adds a new perspective to the analysis of how regulation should respond to the global financial crisis of 2008–2009. It focuses on the ‘private’ as opposed to ‘public’ aspect of regulation, and highlights the works of the public–private dialectic in regulation and enforcement.
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Chapter 3: Private regulation and enforcement in microfinance: a multilayered and polycentric puzzle

Geoffrey P. Miller and Fabrizio Cafaggi

Extract

Microfinance is a new, varied and evolving field of practice and study. It started as microcredit, consisting in the provision of small loans to very poor entrepreneurs excluded from the formal financial sector because of their perceived riskier profile and inability to pay back as well as the lack of traditional forms of guarantees (Yunus, 1999). The leading idea was to demonstrate that the poor always pay back and that offering financial services to them could be a socially rewarding as well as a financially sustainable or even profitable activity. Microfinance soon spread all around the world, adapting to different contexts, developing new forms and models (e.g. individual lending, a more profit-oriented nature, flexibility in maturity, etc.), but also evolving in some countries into a wide range of services to the poor, such as micro-savings, micro-consumer credit, micro-insurance, money transfers, and so on. It is now identified, generally, with the provision of financial services to low income people otherwise excluded from the financial sector.

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