Financial Crime World

Financial Crime Prevention a Priority for Jordan’s Microfinance Sector as New Regulation Takes Effect

Amman, Jordan - In a significant move aimed at boosting financial inclusion, consumer protection, and system stability, the Government of Jordan has passed a new regulation requiring the Central Bank of Jordan (CBJ) to oversee microcredit and other financial services offered by microfinance companies. The landmark legislation, which comes into effect mid-2015, mandates licensing and minimum capital requirements for microfinance institutions (MFIs) operating in the country.

Key Provisions

  • Licensed MFIs will be required to disclose their founding shareholders, board members, and executive management
  • Non-profit MFIs can opt for a lower minimum capital requirement of JOD 2 million based on their reserves
  • Licensed MFIs will be allowed to offer a range of financial services beyond microcredit, with the exception of taking deposits

Benefits of the New Regulation

  • Promotes transparency and accountability in Jordan’s microfinance sector
  • Encourages financial inclusion, particularly in remote areas where access to financial services has been limited due to infrastructural deficiencies
  • Addresses issues related to lack of regulation, which had hindered growth in the past

Impact on the Microfinance Sector

The new regulation is expected to bring significant benefits to Jordan’s microfinance sector, including:

  • A safer and more stable financial environment for all stakeholders
  • Increased transparency and accountability from licensed MFIs
  • Improved access to financial services for low-income individuals and communities

History of Growth

Jordan’s microfinance sector has been growing rapidly over the past few years, with the eight MFIs currently reporting to the MIX Market serving over 300,000 active borrowers with an aggregate loan portfolio worth approximately USD 260 million. Despite this growth, experts have noted that a lack of regulation had hindered the sector’s development.

Authority and Supervision

The CBJ will have the authority to issue executive orders and instructions to regulate microfinance in Jordan and supervise licensed MFIs. This new regulation is expected to ensure that the microfinance sector operates in a safe and stable manner, promoting financial inclusion for all stakeholders.

Conclusion

The new regulation is an important step towards creating a more transparent and accountable microfinance sector in Jordan. With its focus on promoting financial inclusion and stability, this landmark legislation is expected to have a positive impact on the country’s economy and society as a whole.