Regulation of Microfinance Service Provider in China and Bangladesh : An Approach to Strengthening the Regulatory Environment

This paper compared the regulatory framework of microfinance service providers (MSPs) in China and Bangladesh. Formal MSPs were regulated under the banking legislation and supervised by central banks in both countries. The regulators had paid special attention to newly established financial entities-microcredit companies (MCCs) village/township banks (VTBs), and lending companies (LCs) in China considering their business nature. Similarly, in Bangladesh, Grameen Bank had perceived comparatively relax regulation based on its objective to extend microfinance services to the landless and underserved population. NGO-MFIs were regulated by microcredit regulatory authority (MRA) under microcredit regulatory act 2006 in Bangladesh. In China, although NGO-MFIs did not have legal identity, they had extended financial services to the lowest market segment. Therefore, the present study proposed a separate regulatory framework for NGO-MFIs (reviewing other countries experience) which may lead to sustainable development of NGO-MFIs in China. The paper also suggested further relaxation of existing MCC rules to promote the microfinance services in China