Basel Blesses Microfinance

If ever there were a sign of going mainstream, this is it. Financial inclusion is moving beyond national boundaries to the international stage and the standard-setting bodies. The G20 and FATF—the Financial Action Task Force—have already acknowledged its importance. And now the Vatican of financial standards, the Basel Committee on Banking Supervision (BCBS), has released Microfinance Activities and the Core Principles for Effective Banking Supervision. This, the first paper ever by the Basel Committee on a financial inclusion topic, offers guidance for the application of the Basel Core Principles for Effective Banking Supervision (BCP) to depository microfinance activities.

In recommending this document I have to declare an interest—CGAP was the co-chair along with the Central Bank of Argentina of BCBS’s Microfinance workstream, which drafted the document. We believe its issuance represents an important step for elevating microfinance and financial inclusion in the minds of supervisors, and for continuing the understanding of what microfinance and financial inclusion can contribute as part of the financial system—not just an alternative to it.