Regulation and Supervision of Albania’s Microfinance Industry

Publication Date: May 2005
Published by: Microfinance Regulation and Supervision Resource Center
Document Type: PDF

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How can the strength of Albania’s microfinance industry be further enhanced?

This paper argues that the healthy state of the microfinance industry in Albania has given it the strength to negotiate with the Bank of Albania (BoA) to obtain a regulatory and supervisory system suitable for its needs.

It discusses:

• The development of microfinance and supervision, and its effect on practitioners:
  • The development of state regulation of microfinance activity;
  • The role played by the BoA in regulation.
• The strengths and weaknesses of the present regulatory and supervisory systems:
  • Low capital requirement encourages grass roots development of SCAs;
  • However, the Union of SCAs often does not disclose difficulties to the BoA.
• The strengths and weakness of the regulation as regards microfinance:
  • High minimum capital requirement ensures that only well-financed organizations consider microfinance;
  • Low capital leverage allows microfinance institutions (MFIs) to access considerable levels of donor funding;
  • However, the regulation is weak in the area of distribution.

The paper concludes with the following recommendations:

• Further reform should try to cater to all the financial needs of the client.
• MFIs need to bring innovative proposals to BoA to enable a sound supervisory and reporting system for a wider variety of financial services;
• BoA needs to maintain its commitment of resources to this sector, build up the capacity of its microfinance specialists, and maintain close links with the Ministry of Finance, which has the capacity to effect new legislation in this sector.