The capacity dilemma: Regulating microfinance in Sri Lanka and Nepal

This article explores how the capacity of government institutions affects microfinance policy implementation by considering the case of microfinance regulation in Sri Lanka and Nepal. Qualitative analysis of these two cases demonstrates that capacity concerns not only can prevent policy from being passed, they can also compromise the effectiveness of ones that have. So while there are many who feel that microfinance can be more effective within a proper legal framework, implementing that framework requires sufficient capacity on the part of state institutions.