Also available in French and in Spanish
At different stages in the course of its history, the sector of inclusive finance experienced different developments in terms of regulation. In its early days, microfinance was focused on microcredit and was nearly unregulated. The extension of the financial services offered, including savings and insurance, however, brought about an adaptation of regulatory frameworks in later years. An increased commercialization and competition with an ever larger number of financial service providers led to an attempt to adapt the rules of traditional finance to the context of microfinance. In addition, microfinance crises in certain countries (e.g. in Bolivia, Bosnia Herzegovina, and Morocco) created a renewed awareness of the importance of formal regulatory frameworks and of their contribution to building inclusive financial systems. In some places, the evolution of regulation lags behind market developments, and informal regimes replace formal ones. In other places, however, public efforts reinforce private efforts, and regulation helps to build inclusive financial systems.
The so-called “regulator’s dilemma” thereby consists in guaranteeing the stability of the financial system, in controlling and legitimizing providers, and in protecting clients, while at the same time allowing for enough flexibility to foster inclusion and encourage innovation. Today, innovations, particularly in terms of new technologies, provide further opportunities for inclusion (e.g. via mobile money solutions). However, they also confront the sector with new challenges concerning regulation. This is one of the reasons why the topic has been reinitiated as a priority in international agendas – in a year which marks the european Year of Development, the definition of the post-2015 sustainable development goals, and also international discussions on financing for development.
This second issue of Passerelles deals with the topic “Regulation for Innovation? Building Inclusive Financial Systems” and consists of two articles and two interviews. The two articles link recent research on regulation and innovation to experiences from the field; while the two interviews provide further insights into concrete cases.
The second Annual Symposium of ADA was also organised around the same theme as this issue of Passerelles.