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Regulation and supervision of microfinance in Albania

Keywords: Microfinance institution , regulation , supervision , credit union , non-bank financial institution.

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Abstract:

This paper describes important regulation issues that concern microfinance. It starts byconsidering literature on how and why to regulate and supervise microfinance. Considering thespecific case of microfinance in Albania, it analyzes the context of this industry and someparticular issues that might influence its growth. Related regulation in Albania seems to be notactivity-oriented since a real definition of microfinance is lacking in the Albanian law. Therefor,Albanian microfinance sector needs, first of all, a microcredit and microfinance definition toimplement the right development policies and avoid confusion and license misuse. Moreover, theregulatory framework seems to be too restrictive for institutions supposed to be engaged inmicrofinance example high capital requirement and provisioning. Possible interventions can be inlowering minimum capital requirements for NBFIs to improve entrance, simplifying procedures,documentation and harmonization of the taxation treatment of institutions to enhancedevelopment, encourage access and avoid market distortions. There is the need to implementregulation considering microfinance as an activity, and develop a regulatory framework to inducecommercial banks integrate downward into the microfinance market and help informal start-upsinstitutions develop and get formalized.

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