Regulating microfinance

In response to Janine's post on mobile money in Mongolia, David Lembo from the zzzeitgeist blog expresses some concern: "One question worth considering - do all these development finance programs (mobile banking, microfinance, crop insurance) get a free pass on regulation because they are seen as helping the poor? I sure hope not..."

It just so happens that he is not alone. Nataliya Mylenko on the CGAP blog discusses the need for consumer protections in microfinance:

Obviously disclosure will not solve all of our problems and prevent future crises. But those pointing to its ineffectiveness, especially coming from countries with no disclosure requirements at all, are wrong. Naturally, lenders will continue to try to make terms less clear and hide charges. Of course every individual on the planet will not educate him or herself about all the intricacies of finance. But regulation leveling the playing field and requiring lenders to tell borrowers in clear language the truth about costs and terms is a must. So is making it clear that it’s an individual’s responsibility to protect his or her financial interest – not the lender’s (contrary to what financial industry advertisements say).