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| Volume 1, Issue 2: May 2003 | ||||
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In This Issue State of the Microcredit Summit Campaign Report 2002 Asia/Pacific Regional Microcredit Summit Meeting of Councils Poverty Targeting Trainings Begin in Asia Archived Issues
Vol 1 Iss 4 Sept. '03 E-News Information |
Plenary Session: Policies, Regulations and Systems That Promote Sustainable Financial Services to the Poor and PoorestRemarks by Grace Rubambey
I come from the Bank of Tanzania which is the Central Bank. We pride ourselves in being a pro-poor finance central bank in the region if not in the world. We have been very pro-active for many years from the early 90s as we started our financial sector reforms. We felt it was necessary for the central bank to be involved in promoting the development of an efficient and effective financial system. And of course Tanzania being a very poor country, microfinance being the pro-poor financing mechanism, we are all for it as a central bank. ...The paper does talk a lot about the regulatory framework as I said, but it does not go into the policy framework. Neither does it really talk about the process, the way the regulatory framework should be put in place. In Tanzania, our experience with the policy formulation process, we feel that the process is as important as the product itself. Because the process influences the way the framework, the regulations are going to be implemented. It’s very important to take on board all players in the microfinance system.
…We started our policy formulation process way back in the mid-90s. The policy document was finally launched last year. So it took us that long. But we have no regrets because we feel it changed the mind-set of not only the policy makers but also of the practitioners themselves. Because for a long time they felt like social workers, social development agents, but now they feel they are part of the actors in the financial system and, as such, they understand the regulator much better and we understand them much better. I must emphasize the fact that the participatory approach is very important. It has worked well for us. Now, if I can give you some details on our experience. When we started we had pressure from one of the NGOs to be regulated and we hurried and put in place some regulations. But we looked back and said no, these regulations cannot go on because first of all the internal pre-transformation assessment shows that the NGO that wanted to transform had not achieved the necessary financial and technical capacity to do so. Also at the time none of the regulated financial institutions were offering microfinance services. So there was really no need to rush. Also due to the inadequate knowledge of microfinance by the central bank, the regulations that we had hurriedly put in place really treated microfinance institutions as miniature banks, instead of dealing with the risks posed by the different aspects of microfinance operations in the financial system. A number of concerns that were raised with respect to the regulations could not be responded to without an articulated policy on microfinance on the part of government. This of course included also the interest rates because the policy does give a broad framework, a framework in which the regulations will be formulated. We are currently doing the review and it is taking us at least six months to just review the legal framework, the regulations, and the supervisory framework and of course we are looking at microfinance operations, not necessarily microfinance institutions only. Of course we take cognizance of the fact that there will be specialized institutions that we need to take into account. But since microfinance operations are done by a variety of institutions we cannot focus on institutions alone, we have to focus on microfinance operations in the regulations that we put in place. |