Ngozi Okoye

Microfinance regulation and social sustainability of microfinance institutions: the case of Nigeria and Zambia

This study examines the effect of regulations on microfinance institutions in Nigeria and Zambia by focusing on the post-regulation experiences and reflections of the microfinance institutions (MFIs) and their regulators. Based on in-depth interviews with the Central Banks as regulators, MFI managers, practitioners and apex microfinance associations, the study finds that regulations in both countries have managed to professionalize the sector, but their effectiveness in augmenting the centrality of social goals to microfinance and MFIs remains doubtful. The poorly designed regulations are not only undermining social goals but also sending wrong signals to would be social investors, with implications for the social image of the industry. The study further finds that regulations have neither speeded the emergence of sustainable MFIs (especially in Zambia) nor accelerated the sectors’ outreach to the poor and the financially excluded. Additionally, considerable levels of political interference and poor regulation have led to unintended consequences to the sector, further frustrating the ultimate goal of extending financial services to the poor. These findings have policy and practical implications for how microfinance engages with the regulatory logic and continues to serve those at the bottom of the pyramid.

Microfinance regulation and effective corporate governance in Nigeria and Zambia

Purpose There have been various forms of regulatory intervention by the central banks of countries to streamline microfinance activities and ensure effective corporate governance of microfinance institutions (MFIs). Considering the limited amount of research in this area and the need to ensure regulatory effectiveness, the purpose of this paper is to evaluate the impact of regulatory provisions on the attainment of effective corporate governance in MFIs in Nigeria and Zambia. Design/methodology/approach Interviews were conducted with regulators at the Central Bank of Nigeria and the Bank of Zambia, directors and executive management officers of MFIs and executives of apex associations of MFIs in both countries. Findings The paper presents five significant findings which are that the regulations have enabled negative outcomes in areas such as board composition, the ownership requirements in the regulations have resulted in differing governance implications, the certification requirements for board members are problematic in practice, supervision by regulators is ineffective and has impacts on risk management and the principle of consultation with stakeholders is inadequate in both countries. Practical implications Regulatory provisions must be robust and fit for purpose to ensure the microfinance initiative in emerging economies achieves the objectives of enhancing financial inclusion and economic development of the society. Originality/value The paper addresses an area of limited research and provides empirical findings in relation to regulation and corporate governance in developing economies, which would help to ensure regulatory effectiveness.