ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Regulator Concerns

In general Renuka Sane and Susan Thomas’ article on “Regulating Microfinance Institutions” (EPW, 2 February 2013) is a judicious and insightful one. But I think one statement may raise an important question – not only for this
article but for financial sector policy in general. The authors state: “All financial regulations fall under the three issues of consumer protection, macro prudential regulation, and systemic risk.” While this is the expressed objective of many central banks/financial system regulators around the world, the overall regulator of financial markets and institutions is typically expected to also be concerned with the role of financial systems in efficiently and equitably supporting economic development. Nowhere is this more apparent in the flourish of concern with “access” which does not come under any of the three
issues listed. Fortunately, the concern with system efficiency and equity does not mean that the process may not be served by innovative operators in financial markets operating independently of the regulators, but the precise regulatory regime clearly has some role.

Consequently, the reported fact that institutions have made “a significant difference in access to credit” is clearly an important consideration for regulators.

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