This article discusses the major institutional and operational aspects of microfinance regulation in Latin American countries. In these countries, the legal structure of microfinance institutions is either in the form of joint stock company, cooperative or private non-cooperative entity. The ownership belongs to individuals or institutions.

The rapid growth of the microfinance sector in the developing world during the 1990s brought it into the limelight, making it a subject of study and analysis for policy makers, central banks, formal financial institutions, academics and even the mainstream media. Much of this discussion and analysis is centered around the viability of microfinance operations, its poverty-reducing and correlated impacts, and its sustainability. The increasing credit portfolios (in some cases, exponentially) and savings mobilization of microfinance programs both impressed and raised concerns for observers.

While the impressive part clearly was the high repayment rates—as high as 95%-98%—the rapid spread of microfinance programs around the globe and the high-levels of community interest and participation; the concerns related primarily to: a) The high interest rates—which ranged from 12% to 18% on a flat basis (or 24% to 36% on a reducing balance basis); b) Repayment pressures—where the line between `discipline' and `force' is often seen to be blurring; c) Safety of members' deposits; and d) The capital constraints increasingly beginning to inhibit the growth of the sector.

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