Rozanova L.I.Institute of Economics of Karelian Scientific Center of Russian Academy of Sciences, Petrozavodsk, Republic of Karelia, Russian Federation lirozanova@mail.ru
Importance The article focuses on the development of legitimate formats of microfinancing, mechanisms for regulating the financial services market. The article emphasizes inadequate approaches to regulating large and small institutions that provide lending and saving services. Objectives The research examines what role microfinance institutions play in the financial services market and whether they follow the region's interests. Methods The research is based on a comparative analysis of conditions various credit institutions operate in. The analysis will allow concluding on the adequacy and appropriateness of regulations that shape the competitive environment for various market actors. I apply a qualitative method of research on the basis of in-depth interviews with specialists in order to survey the professional community concerning the development of microfinance institutions. Results I have examined conditions the credit cooperatives operate in and found out that the applied mechanisms for microfinance regulation contradict the anti-monopoly laws. Conclusions and Relevance When we refer to towns with the population less than 10 thousand people and a half of the population is debt laden, the microfinance market should be stringently regulated since most microfinance institutions there cross the border between lending and usury. It is worth mentioning that smaller lending organizations will not be able to compete with larger institutions if the regulator stiffens requirements to such organizations' assets and equity. However, these forms of lending cooperation are necessary so to develop the financial infrastructure in rural areas and small towns. The results may prove useful to adjust regulatory effects in the financial services market, thus creating conditions for effective market processes.
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