12

Sa-Dhan Patrika

Volume 6

Issue 1

Other organisations dealing only with

borrowing, amongst others, in order

micro-credit do exist, although not

to promote sustainable growth (such

subject to the Central Bank's supervision:

as in the number and amount of

1.  N G O s :

experience

serious

credit delivered).

operational limitations in Brazil due

2.  Reduce information asymmetry;

to a constitutional interest rate

develop a credit risk bureau

limitation of 12 per cent per year (not

c o v e r i n g all potential credit

Developing the

applicable to financial institutions).

borrowers, including positive and

right incentives is

2.  Organisations of Public Interest

negative information, readily

critical to the

(OPI): created by law in 1999, to

available for all sorts of organisations

successful

overcome the limitations described

devoted to microfinance, not only

functioning of a

above. They have to be registered

banks and financial institutions.

microfinance

by the Ministry of Justice and are

3.  Simplify the loan process including

environment

not subject to interest rate limits.

guarantees and other collaterals not

3.  Other organisations: some member

commonly accepted by banks.

states and municipalities have their

4.  Gathering data in order to evaluate

own scheme, assuring public funds

t h e development and identify

to micro-credit. The Banco do Povo

opportunities.

(can be translated as People's Bank)

5.  Create incentives for financial

is the best known example.

institutions to go further north and

northeast, the poorest regions.

The SCM was created in 1999 as a

6.  Improving corporate governance,

financial institution with the following

with adoption of adequate internal

characteristics:

control systems and monitoring

1.  They cannot take deposits from the

processes,

especially

in

public; they are only allowed to use

cooperatives, NGOs, OPIs, and

their own money, official funds, or

SCMs.

funds from other institutions.

7 . Adopting specific supervisory

2.  They cannot lend to consumers; their

processes, appropriate to the type

authorised transactions are related

of business.

to micro-credit to self-employed

Conclusion

people in micro-business (small size

enterprises).

Developing the right incentives is critical

3.  They are required to hold a minimum

t o the successful functioning of a

capital of US$35,000.

microfinance environment. To achieve

4.  O t h e r o p e r a t i o n a l l i m i t s a r e :

it, debate and active participation of

leverage up to five times their net

interested parties is crucial.

worth and risk diversification of

US$3,500.00 per customer.

In Brazil, the Federal Government

created a task force involving four

There are 50 authorised SCMs in Brazil,

ministries, the Central Bank, and federal-

concentrated in the southeast (70 per

owned banks to implement actions

cent of the total number).

aimed at increasing provision of financial

services to the poor.

Main Challenges in Regulating

Microfinance Institutions

Success in this area is in the interest of

The main challenges in regulating

everyone and our effort as regulators will

microfinance institutions in Brazil, in my

continue to be relevant only when they

point of view, are the following:

are

consistent

with

society's

1.  E d u c a t i o n : particularly tricky

expectations. There is still a lot of room for

because of the diversity between

enhancing the financial system's role to

the north and south. However, it is

support economic growth, embracing a

extremely necessary to explain the

large portion of the population otherwise

banking regulation, products, and

left on its own.

benefits and risks associated with

Amaro Luiz de Oliveira Gomes and Cleofas Salviano Junior

Mr. Gomes is the Head of the Financial System Regulation Department (Denor)

­ Central Bank of Brazil (www.bcb.gov.br), Mr. Cleofas is a Senior Advisor, with

the Financial System Regulation Department and coordinates the

microfinance area.

amaro.gomes@bcb.gov.br