2015 Social Performance Task Force Annual Meeting

Siem Reap, Cambodia

Plenary Sessions: June 10-11

Date & Time: Day 2, Thursday June 11, 11:00 to 12:30

Title: Breakout #1: Regulating the industry through partnerships between regulators and associations.

Moderator: Sanjay Sinha (EDA Rural)

Panelists: Javier Vaca (RFR), Jackie Mbabazi (AMFI-Uganda), BangkoSentralngPilipinas (invited)

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Session objective:This panel will examine appropriate roles for regulators and national networks in creating and enforcing regulation. The panel will also look at good models for effective relationships between microfinance regulators and associations and will discuss examples of how the two can work together for the mutual benefit of all parties (regulators, associations, financial institutions, and clients).

The panel will not focus on examples of "good regulation for the industry." Instead, it will focus on the ROLES of various players in creating good regulation. The latter is much more widely applicable; "good regulation" depends very much on the local context but "good/appropriate roles" for the actors involved is a bit easier to generalize to many different contexts.

Session agenda:

(90 minutes total)

5 min—General introduction by Sanjay: Introduction of panelists, session agenda, and main ideas for the panel.

20 minutes—Each panelists delivers an “opening statement” on their primary role in establishing a good relationship with their national regulator / association. Each person should speak for 5 minutes or less.

30 min—Sanjay poses key questions to the panelists, to draw out their experience (questions provided in advance)

35 min—Discussion with the audience

5 min—Wrap up by Sanjay, highlighting main conclusions from the discussion

Session content:

  • Primary questions to answer during the panel: What are good models for effective relationships between microfinance regulators and associations? What contribution have such relationships made to shaping regulation and enforcing it effectively?
  • Sub-questions to answer:
  • What roles should ONLY regulators play? (i.e. roles that are appropriate for regulators but inappropriate for associations)
  • What roles should ONLY associations play? (i.e. roles that are appropriate for associations but inappropriate for regulators)
  • How can the two work together for the mutual benefit of all parties (regulators, associations, FIs, and clients)? What are good models for working together in the interests of financial inclusion?

Talking points—Sanjay

TBA

Talking points—Jackie

  • Opening statement: Please describe AMFIU’s role in influencing regulation in Uganda and establishing a good relationship with the Bank of Uganda.

-AMFIU has positioned itself as the lead sector coordinator. The Association holds a quarterly stakeholder information exchange platform that brings together all stakeholders in the sector to discuss several issues in the industry and disseminate information on innovations, opportunities and challenges in the sector. AMFIU is also the secretary to the Microfinance Forum, organized on a bi-annual basis by the Ministry of Finance – Microfinance department. These platforms have played a crucial role in ensuring that AMFIU’s opinion as a representative of the microfinance industry are taken seriously. The Bank of Uganda attends these platforms and participates in the discussions and therefore, knows what the sector stakeholders require. Consensus reached during these discussions are taken seriously by the Central Bank because they represent opinions of the majority of stakeholders in the sector. All draft microfinance bills have been discussed in these platforms.

-Establishing strong and mutually beneficial ties between government and the Association. In Uganda, policy and law is initiated and developed by government, the Central Bank is an implementer of the law. Because of the good relationship with government (ministry of finance in our case), AMFIU has two members on the regulation committee that is drafting and reviewing the microfinance laws.

-The Bank’s major interest is in ensuring stability of the financial sector and they will be interested in anything that will bring about this. AMFIU used this to introduce the client protection principles to the regulators and ensure that they are included in the microfinance draft law. Consequently, the Bank introduced the consumer protection guidelines that are adhered to by all regulated financial institutions.

-Poverty alleviation is not a priority for the Central Bank but is a priority for the Association. Therefore, in order to have this included in the law, AMFIU argued that a clear definition of a microfinance institution, as one with a double-bottom line be included in the law so that they can be distinguished from the money lenders and other MFIs whose goal is not a double bottom line

-The Bank ofUganda also consults AMFIU on a one-on-one basis on issues related to microfinance because they know that it is easier for us to get information from the practitioners

  • What are good models for effective relationships between microfinance regulators and associations?

-Complimentary. The Central Bank rarely has expertise in microfinance and sometimes find issues in microfinance overwhelming for them. If an Association has shown the strength to be capable of providing enough information as required, they will always be consulted and can therefore influence certain outcomes

-Maintaining Dialogue. This is important to ensure that the laws don’t stifle operations of practitioners. AMFIU used to facilitate a quarterly dialogue for four years after the enactment of the MDI ACT between the MDIs and the Central Bank to discuss challenges in implementation of the law

-Delegated supervision to the Associations – proposed in the draft tier 4 bill

-An industry code of conduct respected by all stakeholders

  • What contribution have such relationships made to shaping regulation in Uganda, and enforcing it effectively?

-Including aspects that had been hitherto considered less important in the law like issues of SPM and client protection

-Review of the MDI Act as a result of the constant dialogue

-Establishment of a financial inclusion department within the Bank of Uganda and a committee on consumer protection, of which AMFIU is a member

-Development and implementation of a national strategy on financial literacy. AMFIU is on the steering committee of this strategy

  • What roles should ONLY regulators play? (i.e. roles that are appropriate for regulators but inappropriate for associations)

-Supervision of prudentially regulated institutions because the expertise, resources and infrastructure to do this are within the Central Bank

  • What roles should ONLY associations play? (i.e. roles that are appropriate for associations but inappropriate for regulators)

-Maintaining industry standards through a code of conduct if it is non-prudential regulation

-Maintaining dialogue between the Central Bank and the regulated institutions

-Provision of data/information on the sector to the Central Bank

  • How can the two work together for the mutual benefit of all parties (regulators, associations, FIs, and clients)? What are good models for working together in the interests of financial inclusion?

-Consistent/periodic dialogue that can be quarterly or any other time period agreed upon between government, regulators and sector practitioners

-Consensus building

Talking points—Javier

  • Opening statement: Please describe RFR’s role in influencing regulation in Uganda and establishing a good relationship with the Banco Central del Ecuador.
  • What are good models for effective relationships between microfinance regulators and associations?
  • What contribution have such relationships made to shaping regulation in Ecuador, and enforcing it effectively?
  • What roles should ONLY regulators play? (i.e. roles that are appropriate for regulators but inappropriate for associations)
  • What roles should ONLY associations play? (i.e. roles that are appropriate for associations but inappropriate for regulators)
  • How can the two work together for the mutual benefit of all parties (regulators, associations, FIs, and clients)? What are good models for working together in the interests of financial inclusion?

Talking points—BSP

TBA