Objectives:

Upon completion of this course, participants will be able to:

• Analyze the unique business models, risk profiles, and social mission of **Microfinance Institutions (MFIs)** and **Financial Cooperatives**.
• Evaluate and apply **tiered and proportional regulatory frameworks** suitable for non-bank financial institutions and cooperatives.
• Develop and assess prudential regulations, including **capital adequacy, liquidity, and asset quality** standards for MFIs.
• Examine the specific governance, internal control, and risk management challenges in cooperative and community-based finance.
• Apply appropriate **market conduct and consumer protection** rules, specifically addressing issues like over-indebtedness and transparent pricing.
• Understand the role and methods of effective **supervision** for MFIs and cooperatives (on-site, off-site, and early warning systems).
• Assess the impact of digitalization (e.g., mobile lending) on the operational and regulatory landscape of microfinance.
• Analyze the legislative framework for the transformation and licensing of MFIs (e.g., from NGO to regulated MFI).

• Regulators and Supervisors from Central Banks and Non-Bank Supervisory Authorities
• Senior Management and Board Members of Microfinance Institutions (MFIs)
• Leaders and Regulators of Financial Cooperative Federations and Apex Bodies
• International Development Professionals and Consultants focusing on Microfinance
• Internal Auditors and Risk Managers in the Microfinance Sector
• Policy Makers involved in financial inclusion and poverty alleviation programs
• Legal Counsel specializing in non-bank financial institution regulation

• Case Studies analyzing microfinance crises and successful regulatory interventions.
• Group Activities in designing a proportional capital adequacy framework for a Tier 2 MFI.
• Discussions on the ethics of interest rate capping and social performance metrics.
• Individual Exercises on calculating Portfolio at Risk (PAR) and Loan Loss Provisioning.
• Role-playing a supervisory review of MFI governance and risk controls.
• Workshop on drafting mandatory disclosure requirements for micro-loans.

Unit 1: The Microfinance Sector and Regulatory Rationale

• Defining Microfinance Institutions (MFIs), Financial Cooperatives, and Credit Unions.
• The dual mission: Financial sustainability and social outreach (poverty alleviation).
• Unique risks: Operational, credit (group lending), interest rate, and funding risks.
• The debate: Regulating deposit-taking vs. non-deposit-taking MFIs.

• Rationale for a **proportional regulatory approach** based on size, complexity, and risk.
• Designing a tiered licensing and supervision regime for the sector.
• Legislative requirements for registration, licensing, and revocation.
• The role of self-regulatory organizations (SROs) for small cooperatives.

Unit 2: Prudential Regulation and Stability

• Developing appropriate **Capital Adequacy Ratios (CAR)** for MFIs.
• Liquidity requirements and managing volatile funding sources.
• Loan Loss Provisioning and best practices in defining **Portfolio at Risk (PAR)**.
• Stress testing and scenario analysis tailored to microfinance market shocks.

• Special governance challenges in cooperative structures and board oversight.
• Internal controls and addressing high operational risk (cash handling, agent networks).
• **Social Performance Management (SPM)** and integrating the social mission.
• Preventing mission drift and excessive commercialization.

Unit 3: Market Conduct and Consumer Protection

• Addressing the risk of **client over-indebtedness** and multiple borrowing.
• Mandatory disclosure and **transparent pricing** (Annual Percentage Rate - APR).
• Fair marketing, sales practices, and preventing coercive collection methods.
• Regulatory tools for monitoring responsible lending practices.

Unit 4: Supervision and Off-Site Monitoring

• Designing a focused, **risk-based supervision** framework for the sector.
• Tailored reporting requirements and financial data analysis (e.g., PAR, Operational Self-Sufficiency).
• Effective on-site examination procedures for microfinance operations.
• Implementing early warning systems and corrective action for troubled MFIs.

Unit 5: Digitalization and Future Outlook

• Regulating mobile lending and digital credit providers (MFS/FinTech).
• The role of **Credit Information Sharing** (CIS) in managing over-indebtedness.
• Addressing cybersecurity and data privacy in digitized microfinance operations.
• Regulatory approaches to MFI transformation and acquisition by larger groups.