credit programs was not consistent with best practices in microfinance and worked to undermine the development of the microfinance industry. This problem is further complicated by the shifting priorities on policies such as microcredit funding as government regimes change. The development of microfinance in the Caribbean region depends on capitalizing on our many naturally enhancing factors such as well developed transportation and communication networks, political and economic stability, secure financial markets and dense albeit small population sizes. Clarity needs to be established on the goals of microfinance, so as to determine appropriate enabling policies such as a supportive regulatory framework. RECCOMENDATIONS FOR REGULATING THE CARIBBEAN MICROFINANCE SECTOR The starting point in regulating the largely un-regulated microfinance industry in the Caribbean is a comprehensive understanding of the present state of the industry. Equally important is the need for clarity of purpose to be signalled by governments, whose commitment to the effort must remain unfaltering. Achieving these two landmarks will lay the foundation of where we are and where we want to go, so that a plan can then be worked. Microfinance in the Caribbean region is often misunderstood, and is generally taken to mean giving money to the poor. A clear definition of what microfinance is, what it is supposed to achieve and what activities or services fall under the microfinance umbrella must be formulated. These definitions must not be static but must leave room for continuous refinement as microfinancing itself is still evolving globally. A careful study of all institutions that purport to offer microfinance services should be conducted to determine among other things financial sustainability, sources of funding, risk to the
ASSET QUALITY Portfolio Quality • No need for concern about large loan concentration • Focus on quality of delinquency management systems Write-Offs and Write-Off Policy • Should fit microcredit terms and experience Portfolio Classification System • Treatment of with unconventional form of guarantee Productivity of Long Term Assets No change Infrastructure • Allowance for low-cost infrastructure suitable for reaching the poor Management Governance/Management • Unconventional owners and sometimes managers Human Resources • Different staff profile, salaries • Importance of incentive systems Controls, Audit • Internal audit must take lending methodology into account Information Technology • Delinquency monitoring focus Strategic Planning and Budgeting No change Earnings Return on Assets • May be higher than the norm Return on Equity No change Efficiency • Administrative expected to be well above standard commercial banking • Indicators and benchmarks specific to microfinance are needed here Interest Rate Policy • Interest well above standard commercial banking Liquidity Productivity of Current Assets No change Liability Structure • May differ substantially from most other banks Liquidity Ratio No change Cash Flow Projections No change Source: Rhyne (2002) Figure I: Percentage Composition of MFIs by Institution type as at Dec 31st 2000 and Dec 31st 2009 Source: Microfinance Information Exchange (MIX) (2011)