Does Regulation Influence Microfinance Institutions to Be More Client-Responsive?

What is it about?

This paper reveals the impact of a specific regulatory regime, the “Microcredit Regulatory Authority Act, 2006”, enacted by the Bangladesh government to monitor and supervise nonprofit nongovernment organizations (NGOs). We analyzed survey and interview data provided by clients of both nonprofit microfinance institutions (MFIs) registered under the Act and nonprofit institutions that are unregistered, all lending only to women. Client-level analysis using fixed effects for specific MFI membership is applied, focusing on the role of regulation by comparing protections as consumers of financial intermediations in terms of financial literacy, awareness, and status of clients of registered and unregistered MFIs.

Featured Image

Why is it important?

These findings support the need for MFIs to implement consumer protection measures and inform their consumers about key issues to achieve improved client outcomes.