Microfinance activities and the Core Principles for Effective Banking Supervision

Microfinance – the provision of financial services in limited amounts to low-income persons and small, informal businesses – is increasingly being offered by a variety of formal financial institutions, including banks and non-banks, either as their core business or part of a diversified portfolio. As recommended in the Core Principles for Effective Banking Supervision, non-banks that mobilise deposits from the public should be subject to regulation and supervision commensurate to the type and size of their transactions. In general, microfinance oversight, whether over banks or other deposit taking institutions, should weigh the risks posed by this line of business against supervisory costs and the role of microfinance in fostering financial inclusion.