The Trouble with Regulating Microfinance
49 Pages Posted: 13 Aug 2012 Last revised: 15 Oct 2013
Date Written: 2013
Abstract
In its short lifetime, the neologism 'microfinance' has become central to several realms - among them philanthropy, social entrepreneurship, commercial banking, and economic development efforts underway in numerous nations - with no consensus on what the word includes and excludes. Indeterminacy makes microfinance resemble other abstract polysyllabic Latinate words like 'nationalization,' 'industrialization,' 'privatization,' 'globalization,' and 'democracy.' Unlike these other nouns, however, microfinance has struck observers as amenable to unitary regulation.
Well-intentioned proposals start from the erroneous premise that a single statute, best-practices compendium, or set of governing principles can cover all of microfinance. These efforts are destined to fail until reformers pause to consider the goals they can pursue and the varied sectors they address. The word has its uses. Before microfinance can be regulated, however, it must be disaggregated.
Keywords: microfinance, microcredit, development, poverty, banking, nonprofit, double bottom line, social entrepreneurship
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