a wide range of supervisory aspects, in areas such as licensing, capital adequacy, risk management, and more. in total there are 25 principles. but, i stress, these are principles, not rules, and require further specification. the basel committee considers that many of these principles would also be appropriate for nonbank financial institutions that offer deposit and lending services similar to those provided by banks. but the committee also recognizes that some of these categories of institutions may be regulated differently from banks as long as they do not hold, collectively, a significant proportion of deposits in a financial system. however, they need some form of regulation commensurate to the type and size of their transactions. how should we tailor regulation to the unique characteristics of microfinance activities? the basel committee is currently working on illustrating what forms regulation can take, keeping in mind the diversity of the sector. that is why this effort is a collective one, and why the committee works together with supervisors from all over the world in the committee ’ s international liaison group, as well as the imf, the world bank, cgap and regional groups of banking supervisors. concluding remarks 13. ladies and gentlemen, i will conclude. microfinance is booming. it is now widely acknowledged as an effective way to reach out to the poor. and, as i said in the beginning, this belief is not just confined to charitable institutions, but felt the world over. still, the current market size forms only a small part of the estimated global demand for microfinance services. as such, the broadening of financial services offered by microfinance institutions, specifically the deposit - taking facilities offered by many microfinance institutions, is a welcome development. in parallel with this, the role of the prudential supervisor will become ever more relevant. prudential supervision can contribute to inclusive financial systems by taking account of the specific characteristics of microfinance while not disturbing the international level playing field. the efforts of the basel international liaison group will be an important step forward in this regard. furthermore, adequate supervision may enhance the perceived legitimacy of microfinance institutions, improve their operational management and extend their access to funding. in this way, microfinance not only contributes to the economic development of a country, but also enriches the financial system and financial supervision. so maybe, rather than “ a billion to gain ”, it ’ s a question of “ billions to gain ”! thank you.

##ance, this means a real breakthrough. as you know, a core problem for microfinance institutions is the geographically wide dispersion of their client base. this makes it difficult to serve clients in very remote areas and drives up expenditures. operational costs can be as high as 15 to 20 % of loans, compared to less than 5 % for banks in industrialised countries. the introduction of mobile phone banking now makes it possible to reach millions of people, in a fraction of a second and without the high costs of establishing an extensive network of offices. such cost savings are important for microfinance institutions, as they allow them to reduce interest rate margins while not impairing profitability. 6. these positive figures are truly good news. as a central banker, i care for economic growth and the reliable functioning of financial markets. and microfinance clearly contributes to these goals. for one, microfinance stimulates households to start business activities. access to credit allows poor people to take advantage of economic opportunities, thus contributing to local economic development and job creation. second, microfinance fills a gap in the traditional financial infrastructure, which did not provide for lending to the poor. indeed, broad access to financial services is a key characteristic of a deep and efficient financial system. it is encouraging to see that the market is now taking over the role which was previously only performed by governments or ngos. and third, more and more microfinance institutions have become real financial intermediaries and now also offer deposit facilities to households. as such, microfinance can help households to smoothen their consumption over time, reducing saving and borrowing constraints. such constraints are particularly relevant for poor households because their incomes are often uncertain and they generally lack collateral. at the same time, deposits form an additional funding base for microfinance institutions and decrease their dependency on external funding. in these ways, microfinance enhances economic growth, enriches financial markets and increases welfare of individual households. role for the prudential supervisor 7. but this is only one reason for my interest in microfinance. the other one follows from my role as prudential supervisor. this brings me to the second remark i want to make today. so far, the growth of microfinance has, by and large, occurred outside a regulatory framework. but as a depositor, you expect your bank to be safe and not to take undue risk, so that you can retrieve your money at all times. if