Development of Mechanisms for Regulation of Microfinance and Credit Cooperation Institutions to Boost the Domestic Investment Demand

Abstract

The subject of the research is the economic and organizational aspects of the regulatory mechanism for governing activities microfinance and credit cooperation institutions that can influence the domestic investment demand. The purposes of the paper were to analyze and evaluate the current mechanisms for regulation of microfinance and credit cooperation institutions as well as regulatory innovations of the Bank of Russia aimed at improving the microfinance market governance and, secondly, to develop proposals on how to increase the potential of the above institutions in order to stimulate the domestic investment demand. It is concluded that microfinance and credit cooperation institutions can influence the domestic investment demand and possess appropriate products and services; therefore, it is necessary to strengthen the regulatory mechanisms of their support to enable full participation of these institutions in boosting the domestic investment demand. The paper approves the Bank of Russia initiatives aimed at the development of microfinance institutions and the regulator’s desire to develop mechanisms for the proportional regulation of the microfinance sector, particularly those that stimulate the growth of the domestic investment demand. At the same time, subject to criticism is a number of regulatory initiatives that tend to limit the freedom and the initiative of microfinance and credit cooperation institutions and do not promote competition. The paper emphasizes the importance of strengthening the most important element of the regulatory mechanism, the one that governs the activity in a microfinance organization. The relevance of the research consists in the development of proposals aimed at the working out of mechanisms for the proportional regulation of microfinance institutions in the system of the financial market regulation.