The regulatory issues in the operation of the micro-finance sector in Haiti

Abstract

Microfinance and micro-credit practices have become a popular means of local development. This research provides an overview of micro finance Latin America and the Caribbean with specific emphasis on Haiti. The thesis contained number of issues related to financial regulation and supervision that could potentially pose obstacles to financial institutions involved in microfinance. This research explores the conditions under which micro credit is an appropriate rural development intervention. Although there are a great number of financial regulations which in one way or another affect the institutions which lend to micro entrepreneurs, the study focuses on those regulations which, while appropriate for most other financial institutions, may have a negative impact on microfinance institutions. These regulations impose restrictions that are particularly costly to institutions involved in microfinance, either by raising the cost of financial service delivery or by not providing the intended reduction in risk to the institution. The research identifies a number of areas in which such biases against microfinance exist or could potentially exist, including, capital requirements, loan loss provisioning, usury laws, documentation, and restrictions on the operations of financial entities. The areas of potential and actual bias are summarized at the end of the paper where some recommendations are also put forward on how to address them.