4. Problems of microfinancing that require a legislative solution
The regulation of MFOs
Questions regarding the drafting of legislative regulations for MFO activities can be
classified into three groups:
1. Shall the norms of prudential
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regulation provisions be applied?
2. When and what norms of prudential regulation provisions shall be applied?
3. What shall be regulated: organizations carrying out which types of activity?
Shall the norms of prudential regulation provisions be applied or not applied?
Experts note that even having hundreds of thousands of clients, microfinance rarely
occupies a large enough portion of the country’s assets to pose a serious risk for the banking
and payments systems as a whole. For this reason the only sound reason for the availability
of the prudential regulation provisions for MFOs accepting deposits is the protection of the
MFO
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depositors’ interests. Sound reasoning is strengthened under the conditions of
Uzbekistan’s market economy when financial instability may be provoked by additional non-
economic factors.
The majority of specialists express the same opinion that it is necessary to apply
prudential provisions to those MFOs which accept deposits. This requires obtaining a license
from a regulatory body. Under the present conditions in Uzbekistan only one regulatory body
possesses the resources, experience and independence for necessary to carry out this task.
That regulatory body is the Central Bank of the Republic of Uzbekistan
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.
The norms of prudential provisions should not be used for solution of those issues
which do not require organizations’ financial viability. Minimal non-prudential requirements
including provisions of the Civil and Criminal Codes
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would suffice for those MFOs which
do not accept individual deposits and the regulation can be limited to monitoring with an
insignificant degree of administrative authority.
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