To What Extent Is Industry Self-Regulation Applicable to Microfinance? The Case of TAMFI in Tanzania

After beginnings with relatively low regulatory requirements, a consensus has formed around the idea that regulation is essential for microfinance institutions to formalize and to protect the poor and financially excluded. Two types of regulation have traditionally been studied in the literature: the interventions from regulators and the influence of competition. However, governmental as well as market failures exist, and neither the authorities nor market forces have appeared as optimal for securing the dual mission of social enterprises such as microfinance institutions. In such a context, this paper explores the potential of industry self-regulation in microfinance. Industry self-regulation refers to the association of organizations with the aim to develop and enforce rules and norms regarding their collective conduct. Through a qualitative inductive research carried out at the Tanzania Association of Microfinance Institutions, the paper identifies and investigates the factors that contribute or prevent the self-regulatory role of microfinance associations.