Regulatory and Supervisory Mechanism for MFIs in Bolivia

Publication Date: Aug 2001
Published by: National Bank for Agriculture and Rural Development - NABARD
Document Type: Paper

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How are Bolivian MFIs regulated?

This study visit to Bolivia was undertaken as part of National Bank for Agriculture and Rural Development’s (NABARD) quest for finding solutions to the problems of the poor in accessing financial services.

The paper describes the present scenario of the Bolivian financial sector which consists of:

First tier financial institutions:

• Commercial banks (CBs),
• Non-Banking Financial Entities (NBFEs).

Second tier financial institutions:

• FUNDAPRO (private),
• FONDESIF (public),
• NAFIBO (public).

The paper defines the processes for regulation and supervision of the MFIs by:

• Regulatory norms:
• Portfolio evaluation,
• Portfolio classification.
• Prudential norms:
• Capital adequacy,
• Provisioning,
• Avoiding double or multiple financing.

Finally the paper presents the study team’s learning:

• User friendly technology through standardization of accounting systems and computerization helps the management in taking appropriate policy and operational decisions.
• Transparency in credit operations builds borrower confidence and puts all operations above board.
• Though compensation packages based on basic salary, plus incentives based on business generated, help in business development, they also have an inbuilt bias against smaller loans.