| Abstract: |
Following the United Nations declaration of 2005 as the International Year of
Microcredit, international organizations began to promote a tighter regulatory
and supervisory framework for the microcredit industry. In this paper, I
review the theoretical basis of this development considering recent empirical
findings that microcredit programs tend to have initial success yet
demonstrate few significant benefits beyond two years. I utilize an
agent-based simulation as an ex-ante policy assessment tool to examine a
tighter regulatory strategy. My findings for Kenya, with possible application
to other developing countries and regions, suggest that a less rigid
regulatory framework is more likely to lead to more sustained positive impacts
than this emulation strategy. |