Diversification of financial service channels and providers

These are policies that lower the regulatory barriers to offer savings and insurance products for low-income clients, promoting new entrants in the market. Strategies to adapt standard banking regulations to accommodate the specific nature of microfinance include licensing micro deposit-taking, through the creation of specialized units dedicated to microfinance, the granting of bank licenses to successfully transforming financial NGOs, or the licensing of non-bank agents. Regardless of the strategy chosen, high-level political leadership can catalyze regulatory initiatives to broaden access.

In Indonesia, entry barriers to the financial sector were lowered through the establishment of 2,100 rural, second-tier banks, holding 5.7 million deposit accounts and 2.5 million outstanding credit accounts. In the Philippines, the Insurance Commission introduced a specialized regulatory and supervisory framework for microinsurance mutuals, which are income tax-exempt and require a lower guarantee fund. Two million households have gained access to formal insurance through this model.

In Bolivia, 2 microfinance banks and 6 deposit-taking MFIs (regulated under a special regulatory framework) hold 14% of total assets in the financial sector and capture US$400 million in deposits, and in Uganda, an additional regulatory tier for deposit-mobilizing MFIs has, after only 3 years, resulted in access to formal credit and savings for about 200,000 households.