presents deposit insurance profiles for these two countries and for Equatorial Guinea, Kenya, and Uganda.<sup>15</sup>

**Table 9.** Formal Deposit Protection Structures, Selected Countries

|_Country_|_Year_<br>_created_|_Coverage limits_|_Yearly premium_|_Funding_|_Administration_|
|---|---|---|---|---|---|
|Equatorial Guinea|1999|ECU 3,557 (approx 3 x GNI per capita);<br>excludes interbank deposits.|Risk based: 0.15 percent<br>of deposits + 0.5 percent<br>of nonperforming loans|Permanently<br>funded|Joint private<br>and public<br>agency|
|Kenya|1985|US$1,750 (approx 5 x GNI per capita);<br>excludes interbank deposits|0.15 percent of average<br>quarterly deposits|Permanently<br>funded|Public agency|
|Philippines|1963|US$2,375 (approx 3 x GNI per capita);<br>excludes interbank deposits|0.2 percent of average<br>quarterly deposits|Permanently<br>funded|Public agency|
|Tanzania|1994|US$376 (approx 2 x GNI per capita);<br>excludes interbank deposits|0.1 percent of average<br>quarterly deposits|Permanently<br>funded|Public agency|
|Uganda|1994|US$2,310 (approx 8 x GNI per capita);<br>excludes interbank deposits|0.2 percent of average<br>quarterly deposits|Permanently<br>funded|Public agency|

GNI Gross national income. _Source_ : Demirguc-Kunt and Kane (2001).

# **RELATED NONFINANCIAL REGULATORY ISSUES**

68. Various components of the regulatory framework are closely interrelated and may be interdependent. For instance, the existence of a special law on microfinance or of a more general law on banking and finance that recognizes microfinance as a legitimate activity when carried out by authorized institutions is not a sufficient condition for the development of institutions providing microfinance services. On the part of MFIs, substantial investment may be required to bring their systems up to the standard required for formal reporting requirements. On the part of supervisory authorities, they may have to adapt regulations governing interest rates, collateral, and portfolio quality to the methodologies of microfinance for commercial financial institutions to become actively involved in microfinance.

69. **_Judicial procedures on ownership, security interest, and collateral issues._** Much remains to be done in the three countries on reforming laws and judicial processes in relation to property rights, collateral law, and security interest, not only for microfinance transactions, but also for the financial sector as a whole. Tanzania has taken significant steps to modernize and improve its legal system and judicial processes for resolving commercial disputes, as illustrated in box 2. Tanzania’s approach to unclogging the heavy load of cases brought before the High Court is an innovative approach that can provide illustrative lessons for other countries in the region and elsewhere.

70. **_Tax and fiscal policy issues._** Tax laws on admissible expenses, for instance, provisioning for possible loan losses, need to be synchronized with the requirements for prudentially acceptable operational procedures of financial institutions. The Bank of Tanzania’s requirements and procedures for asset

> 15  Deposit insurance coverage in the countries cited is clearly narrow in scope (it excludes interbank deposits) and low in coverage limits per account. In the case of the Philippines and Tanzania, membership in the deposit insurance system is compulsory for banks and institutions that are authorized and licensed to accept deposits, and their premiums are assessed and collected quarterly. Financial institutions that are neither regulated nor supervised by the central banking/supervis ory authority, for example, NGO MFIs and CFIs, or that may be registered with the banking authority and may be authorized to mobilize wholesale institutional deposit funds through large-value certificates of time deposit or money market instruments but are not authorized to accept retail deposits from the public, are not part of the formal deposit insurance system. The financial cooperative sectors in the countries studied count on a significantly large base of members, whose savings deposits in their respective CFIs may therefore be at risk of loss because of a variety of factors, including fraud.

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