Staschen, Stefan
(2010)
Regulatory impact assessment in microfinance: a theoretical framework and its application to Uganda.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis develops a public interest methodology for assessing the impact of
regulatory reforms in microfinance, applies this methodology to the case study of
Uganda and explains the results by analysing the political economy of policy
change. It thus combines public and private interest approaches in assessing microfinance regulation.
Firstly, the study develops a methodology for regulatory impact assessment based
on the public interest theory of regulation. The first step is an analysis of market
failures as the main rationale for regulation. Regulatory objectives are then defined with reference to these market failures. Finally, a variety of quantitative and
qualitative impact indicators are identified to measure the benefits of regulation
with reference to the achievement of the regulatory objectives while also considering the costs. Secondly, the thesis applies this rationale-objectives-indicators approach to the new legal framework for microfinance deposit-taking institutions
(MDIs) in Uganda using similar, but unregulated microfinance institutions as a
control group. The results show that the MDI regime‘s generally positive impact
was only achieved at substantial cost to the regulator and regulated institutions
and is skewed towards safety and soundness and systemic stability without adequate consideration of other objectives such as consumer protection and access.
Thirdly, the thesis explains the degree to which public interest objectives were
achieved by analysing the political economy of regulatory change. It shows that
the three stakeholder groups with the best knowledge of microfinance regulation
and whose interests were most closely aligned with the public interest objectives - the Central Bank (Bank of Uganda), the MDI candidates, and donor agencies - were also those who had the strongest influence on the policy change process.
The thesis concludes that its unique contribution is to develop a thorough methodology for assessing regulatory impact in microfinance. The methodology is used
to measure the strengths and weaknesses of the MDI regime in Uganda, while the
political economy analysis explains why these strengths and weaknesses arose.
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