Banking Regulation Influence on Microfinance Lenders' Characteristics and Outcomes

This article is devoted to assessing the impact of banking sector regulation on the characteristics and performance of microfinance organizations (MFO). In the course of the work, dependent variables (MFO performance indicators) and independent variables characterizing the indicators of bank regulation measures and the characteristics of MFOs that could have an impact on the estimated performance indicators of microfinance organizations were identified, developed and grouped. The results based on the construction of multiple linear regression with control variables, showed that strengthening the regulation of the banking sector, by affecting the growth of capital and deposits, costs and financial leverage in MFIs, can contribute to the improvement of the financial stability of MFOs and also have a positive or negative effect on the return on equity. Thus, the state-authorized bodies responsible for regulating the banking sector should assess the consequences of applying banking regulation measures not only for the banking sector, but also for the financial sector as a whole, including for microfinance organizations, to create the prerequisites for enhancing the stability of their functioning and at the same time allow them to remain flexible structures.