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> Posted by Sonja E. Kelly, Center for Financial Inclusion at Accion, and Sergio Navajas, Multilateral Investment Fund, Inter-American Development Bank

A Spanish-language version of this post immediately follows the English-language version.

Financial institutions of all sizes around the world are joining the digital revolution. In our work and research at the Center for Financial Inclusion at Accion and the Inter-American Development Bank we have seen some best cases of institutions shifting toward digital as well as some failures. At the end of this month we’ll be discussing strategies to pursue digital innovation as part of the Foromic in Buenos Aires. (Join us for our session on Tuesday, October 31st at 11:15 am!) In the meantime, for institutions that want to start down the path of digital innovation, here are a few of our top strategy suggestions.

1. Make sure you actually want to digitize. Some institutions are digitizing because they have undertaken extensive research on what value digitization will bring to their institution. These analyses involve things like cost reduction, increased access, increased efficiency, better record-keeping, or all of the above. But others are digitizing, more or less, because they see their peers doing it. Remember when your mom told you not to jump off a bridge just because everyone else was? The same applies here. There are some institutions that will do just fine without pursuing a full digital strategy right now. And that is ok. A good rule of thumb here is you’re likely better off not digitizing at all if you are only going to “phone it in.”

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> Posted by Verónica Trujillo Tejada, Consultant, MIF/ Inter-American Development Bank

Building up a regulatory framework for the development of a microfinance market is a complex task. It requires taking into account a broad variety of topics as well as country specific needs and features. There are some internationally-applicable recommendations for the design of microfinance regulatory frameworks (CGAP 2012, ASBA 2010, and Basel 2010) but little is known about how different countries have implemented their guidelines or what the effects are of these rules in each market.

In the recently released paper “Microfinance Regulation and Market Development in Latin America,” published by the B.E. Journal of Economic Analysis & Policy, we analyze the relationship between microfinance regulatory frameworks in 17 Latin American countries and the corresponding markets’ levels of development.

One way to characterize microfinance regulations is as either general or specific rules. The general rules are devoted to regulating typical financial system issues, while the specific rules target microfinance products or institutions. Two other regulation classifications are protection rules and promotion rules. Protection rules have the goal of preserving financial system stability or protecting the financial consumer, and promotion rules aim to favor the development of microfinance services or institutions by softening the restrictiveness of the overall regulatory framework.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.