Regulation of Microfinance Institutions in Africa Major Economies: A Comparative Analysis

Abstract

This paper undertakes a comparative analysis of microfinance institutions regulation in Africa's major economies.

We found out that microfinance institutions are basically divided into 3 types namely formal, semi-formal and informal. The formal institutions are regulated and supervised by the countries Central Banks and other approved regulators.

However, semi-formal institutions like NGO's MFI's are not strictly regulated while the informal are not regulated at all.

It is conclusively agreed that all microfinance institutions requires a level of regulation through banking law, special law and self-regulation. The regulator, however needs to strike a balance in regulation, mixing financial development with the need to sustain the activities of the MFI's.

Regulations therefore, should be the responsibility of the government, central banks, donors, private investors and international financial institutions. Furthermore, regulations require sufficient competencies and enforcement of prudential guidelines to achieve proper regulation. This will grow the MFI's, reduce poverty in Africa and protect depositors while making the MFI's sustainable.