Regulation of Microfinance Institutions in Developing countries: an incentives theory approach

Mathurin Founanou (1, 2) , Zaka Ratsimalahelo (2)

1 UGB - Université Gaston Berger de Saint-Louis Sénégal
2 CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190)

We analyze the optimal policy of regulation of microfinance institutions in developing countries, where investment funds are insured by the government and customer deposits. We used a mixed model, combining adverse selection and moral hazard to characterize a class of optimal incentive schemes applied in presence of government funds and in non-government funded. We also analyse the effects of prudential regulation of deposits on the profitability of MFI and social welfare, and we compare prudential and non-prudential regulation. The incentive scheme that we propose can be regarded as a "smart subsidy" mechanism that contributes to the economic and social development.

Mots clés: Microfinance; adverse selection; moral hazard; incentive mechanisms; regulation; smart subsidy

Domaines: Microstructure des marchés [q-fin.TR]

Mathurin Founanou, Zaka Ratsimalahelo. Regulation of Microfinance Institutions in Developing countries: an incentives theory approach. 2016. ⟨hal-01376900⟩