Sa-Dhan Newsletter Volume 3 Issue 2

Microfinance Regulation

structure of about 30 staff and is the sole authority to permit

SBFE: REGULATION AND SUPERVISION OF

any unregulated FI or any entity to set up a regulated FI (both

MFIS

mFI and other FIs) in the country.

As mentioned earlier the SBFE is an autonomous body that

Regulatory Norms: In Bolivia, regulation of mFIs covers

has the sole authority for regulating and supervising the

broadly two aspects: Portfolio Evaluation and Portfolio

entire financial sector in Bolivia since the reforms in 1988.

Classification. A chart indicating the broad classification and

It is the headed by a Superintendent, who is appointed by the

functions governing the regulation is given in the Table

Congress (equivalent to Parliament in India) for tenure of 8

below. The form of an institution is not very relevant for

years. He can be removed only through impeachment. These

considering whether it would be regulated by the SBFE or

measures ensure that he can function with greater autonomy,

not. Regulation is more for the activities undertaken, and all

and provide better direction to the sector. This autonomy has

FIs mainly undertaking mobilization of public deposits are

helped in developing and building systems and technology

governed by the regulatory norms of SBFE. For example,

for the sector. The Superintendent has under his control

Credit Unions receiving public deposits (Open Cooperatives)

three separate departments: Department of Supervision of

are regulated by SBFE while those that do not receive public

Banks; Department of Supervision of Non-Bank Entities; and

deposits (Closed Cooperatives) are not under SBFE regulation.

Department of Norms and Procedures.  SBFE has a lean

REGULATORY FUNCTIONS OF SBFE IN BOLIVIA

REGULATIONS

PORTFOLIO EVALUATION

PORTFOLIO CLASSIFICATION

Loan Policy

Categorisation of Loans

 Selection of Borrowers

Normal

E

 Their ability to pay

Potential Problem

E

 Assessing the stability

Deficient

E

of the source of their

Doubtful

E

income

Defaulted

E

In Bolivia, regulatory norms are, by and large uniformly

a Capital Adequacy of 10% of the Risk Weighted Assets. The

applicable to the commercial banks and all the regulated

minimum capital requirement is more stringent for regulated

mFIs.  At present, all the regulated FIs are required to

mFIs than for commercial banks. The regulated mFIs need to

maintain a statutory liquidity ratio of 10% of the demand and

maintain a minimum of 12.6% of the risk-weighted assets

time liabilities in approved securities and 2% by way of Cash

(although SBFE contends that 16.6% may be more prudent)

Reserve with the CBB failing which they have to pay a penalty

as against 10% for commercial banks.

of 2% of shortfall for the period. The regulated mFIs are

governed by the following general provisions: the regulated

Provisioning Norms: A good portfolio depends very largely

mFIs (except banks) can accept deposits not exceeding 10

on proper appraisal of the borrower, including his repayment

times their paid up share capital (however, the FFPs are not

capacity. Based on the risk perception, regulation requires

allowed to accept deposits during the first three months of

classification of loans into five broad categories: Normal,

commencement of business); a regulated mFI can issue loans

Potential problem, Deficient, Doubtful and Loss assets. In

up to a maximum of 3% of its' paid up share capital to one

Bolivia, strict provisioning norms are put in place for all the

client; and all the FIs (both the commercial banks and

FIs. Accordingly, any loan not repaid on the due date, is

regulated mFIs) will be required to submit financial statements

considered as that in arrears. Any loan in arrears beyond 5

up to the 15th of the month and then daily through the

days would require a minimum provisioning of 1% of the

network system "Supernet".

total loan account. Provisioning norms for various categories

PRUDENTIAL NORMS

of loans are:

Capital Adequacy: The commercial banks in Bolivia require

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