The contradictions of finance – micro-finance in developing economies
I read this piece (http://bit.ly/aAKjUL) on The Economist” website recently. Some words from the piece struck me immediately. The words are “For all this to happen, banking regulations in many countries need to become more flexible”. Okay, if you read the full piece you’ll see I am paraphrasing to suit myself. BUT, what a contradiction. The developed world is in the throes of a severe economic depression because banking regulation was “light-touch”.
As this piece reports, micro-finance institutions are essential for farmers and small enterprise in developing countries. The majority of these institutions (approx 70%) only offer credit, but not savings products. Encouraging “micro-saving” may not be an easy task, but all banks need liquidity to survive and some should come from locally-held savings. So, on the face of it, deregulating to allow more micro-finance institutions (MFI) to take savings seems like a good idea. Let’s hope the lessons of scant regulation has been noticed by MFI’s. Or maybe it’s time for someone like the IMF to take a “real” global view of regulating the banking sector.