Diagnostic Report on the Legal and Regulatory Environment for Microfinance in Jordan

Publication Date: Jun 2005
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Other (PDF)

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A look at legal and regulatory changes that would improve the microfinance sector in Jordan

This report outlines the findings of a brief mission by the authors about policy obstacles to the development of microfinance in Jordan.

• Provides an overview of the general financial system and a general description of the current state of development of the microfinance sector in Jordan;
• Describes the current legal and regulatory environment.

The report finds the following policy-related obstacles to the development of microfinance in Jordan:

• The potential of the proposed “Bank for the Poor” to harm the existing private micro-lending sector;
• The existence of government-backed subsidized direct lending;
• The lack of credit reference services;
• The absence of a comprehensive regulatory framework specifically applicable to micro-lenders;
• Scant provisions governing non-profit companies with limited liability;
• Leasing company provisions that might put micro-leasing out of the reach of existing market players.

The report concludes with the following recommendations for policy-related activities in Jordan:

• Contribution of the “ The Bank for the Poor” towards the development of best practices for microfinance in Jordan;
• Awareness-building activities with policy-makers, particularly on the likely effects of interest-rate regulatory policies;
• Awareness-building activities with practitioners on the likely consequences of legislative and/or regulatory change, given the existing relatively benign environment;
• Review of options for regulatory elaboration of standards for non-depository microfinance under the “Company Law”;
• Targeted exemptions from leasing company provisions.