Supervision of the prudential regulation of microfinance: The case of CEMAC (Economic and Monetary Community of Central Africa).

Summary Microfinance has been developing considerably in the world for a long time. It remained insignificant until the 1990s in the member states of the Economic and Monetary Community of Central Africa (CEMAC) before experiencing, under the combined effect of the World Bank's active role in the fight against poverty, a poorly codified legal context and exclusive economic policies, its rapid growth and expansion marked by a certain anarchy and many bankruptcies with negative consequences on the economies and morale of the poor populations that are clients of microfinance institutions (MFIs).Aware of the political stakes and encouraged by World Bank experts, the CEMAC heads of state sought solutions to regulate this sector by entrusting the Central African Banking Commission (COBAC) with the mission of building a regulatory framework and ensuring supervision.Despite this regulation, the failure rate of MFIs remains high, which suggests that there are structural flaws that hinder the applicability of the texts and/or the exercise of good supervision.Based on an empirical study built around a sample of microfinance organizations, the study highlights failures whose characteristics can be analyzed in order to identify appropriate strategies to remedy them.The study dismisses the lack of client assets as a risk factor justifying prudential regulation. It shows that MFIs operate in a context of imperfect information with joint liability group loans and individual repeat loans. This regulation of microfinance in CEMAC tends to conform to international prudential standards. However, it appears that it needs to be corrected for greater effectiveness and efficiency.