PRIVATE REGULATION AND ENFORCEMENT IN MICROFINANCE: A MULTI-LAYERED AND POLYCENTRIC PUZZLE

Microfinance is a new, varied and evolving field of practice and study. It started as microcredit, consisting in the provision of small loans to very poor entrepreneurs excluded from the formal financial sector because of their perceived riskier profile and inability to pay back as well as the lack of traditional forms of guarantees (Yunus, 1999). The leading idea was to demonstrate that the poor always pay back and that offering financial services to them could be a socially rewarding as well as a financially sustainable or even profitable activity. Microfinance soon spread all around the world, adapting to different contexts, developing new forms and models (e.g. individual lending, a more profit-oriented nature, flexibility in maturity, etc.), but also evolving in some countries into a wide range of services to the poor, such as micro-savings, micro-consumer credit, micro-insurance, money transfers, and so on. It is now identified, generally, with the provision of financial services to low income people otherwise excluded from the financial sector.