Microfinance sector in general and regulating microfinance institutions (MFIs) in particular have been drawing greatly attention of researchers, practitioners as well as regulators over the past decade. Besides advocates for rush to regulated microfinance, not few opponents caution to form and transform regulated microfinance institutions. The practice also simultaneously reflects both contrary sides as referred in those research studies and reports. Given in such controversial context, the paper aims at comparing the performance between regulated and non-regulated microfinance institutions. Mainly base on the research of Hartarska & Nadolnyak (2007), the first study so far examined the impact of regulation on MFIs, this paper deliberately focusing on Southeast Asia countries. The most important objectives are to test the effect of regulatory factor to MFIs and compare to the past literature reviews. The findings after using the empirical analysis shows that regulatory status have no direct effect on sustainability and number of active borrowers, as well as efficiency that are consistent with the cross-country evidence. However, the result finds the negative influence of savings to outreach and efficiency, which is considered as indirect effect of regulation. In other words, MFIs have savings reach less number of borrowers and efficiency.

TABLE OF CONTENTS

ACKNOWLEDGEMENTS I
ABSTRACT II
TABLE OF CONTENTS III
LIST OF FIRGURES V
LIST OF TABLES VI
CHAPTER ONE INTRODUCTION 1
1.1. Research Background and Motivation 1
1.2. Research Objectives and Contributions 5
1.3. Research Structure 6
CHAPTER TWO LITERATURE REVIEW 7
2.1. Microfinance 7
2.1. Microfinance Perspective in the Four Southeast Asia Countries 8
2.1.1. Indonesia 8
2.1.2. Philippines 10
2.1.3. Cambodia 11
2.1.4. Vietnam 13
2.3. Regulating Microfinance in Practice 15
2.4. Performance Measurement in MFIs 21
CHAPTER THREE RESEARCH METHODOLOGY 25
3.1. Data Source and Sample 25
3.2. Empirical Model 27
3.3. Regression Analysis 30
CHAPTER FOUR EMPIRICAL ANALYSIS 34
4.1. Data Summary 34
4.2. Test of Multicollinearity 35
4.3. Test of Heteroscedasticity 38
4.4. Least Square Regression 39
CHAPTER FIVE CONCLUSION 46
5.1. Conclusion 46
5.2. Limitations 48
5.3. Discussion and Suggestion for the Future Research 49
REFERENCES 51

REFERENCES

Abbink, K., Irlenbusch, B., & Renner, E. (2006). Group size and social ties in microfinance institutions. Economic Inquiry, 44(4), 614-628.
ADB. (2000). Finance for the poor: Manila: Asia Development Bank.
Adizes, I. (1988). Corporate Lifecycle: Prentice-Hall.
Adongo, J., & Stork, C. (2005). Factors Influencing the Financial Sustainability of
Selected Microfinance Institutions in Namibia: NEPRU Research Paper, No. 39.
Agabin, M. (1998). Philippine Microfinance NGOs: At the Crossroads? Study conducted for the Developing Standards for Microfinance Project
USAID–TSPI, Development Corporation.
Ali, A. (2002). Development of Microfinance institutions in Indonesia. Paper presented at the Asia Pacific Rural Finance.
Arbuckle, J. G., Campion, A., & Dunn, E. (2001). Creating microfinance bank in Peru: Microenterprise Best Practices (MBP) Project: USAID.
Arianto, S. A. (2004). Commercialisation of Microfinance and linkages between microfinance and commercial banking. Paper presented at the BWTP International Microfinance Workshop, Phnom Penh, Cambodia.
Armstrong, M., Cowan, S., & Vickers, J. (1994). Regulatory reform: Economics analysis and British expericence. Cambridge: MA: MIT Press.
Arun, T. G., & Turner, J. (2002). Financial sector reform: The Indian experience. The world economy, 25(3), 435.
Avkiran, N. (1995). The shortcomings of traditional bank performance measures in assessing the performance of your branch. The Autralia banker, 109(3), 125-127.
Barres, I., Bruett, T., Curran, L., Escalona, A., Nelson, E., P, Norell, D., et al. (2005). Measuring performance of microfinance institutions: A framework for reporting, analysis, and monitoring
The SEEP Network.
Barth, J. R., Caprio, G., & Levine, R. (2004). Bank regulation and superviion: What works best? Journal of financial Intermediation, 13, 205-248.
Barth, J. R., Caprio, G., & Levine, R. (2004). Bank regulation and supervision: what works best. Journal of Financial Intermediation, 13, 205-248.
Barth, J. R., Nolle, D. E., Phumiwasana, T., & Yago, G. (2003). A cross-country analysis of the bank supervisory framework and bank performance. Financial Markets, Institutions & Instruments, 12(2), 67-120.
Berenback, S., & Churchill, C. (2001). Bank regulation and supervision of microfinance institutions: Expericences from Latin American, Asia and Africa. Washington DC: USAID.
Brandsma, J., & Hart, L. (2001). Making microfinance work better in the Middle East and North Africa: World Bank Institute.
BWTP. (2005). Cambodia Country Profile (Publication., from Asia Resource Centre for Microfinance: www.bwtp.org
Campion, A., & White, V. (2001). NGO Tranformation: Betsheda, Microenterprise Best Practices.
CGAP. (2002). Consensus microfinance guidance: Regulation and Supervision. from www.microfinancegateway.com
Chao-Béroff, R., Cao, T. H., Vandenbroucke, J. P., Musinga, M., Tiaro, E., & Mutesasira, L. (2000). A Comparative Analysis Of Member-Based Microfinance Institutions In East And West Africa (Publication., from MicroSave: www.microsave.org
Charitonenko, S., & Afwan, I. (2003). Commercialization of Microfinance: ADB.
Christen, R. P., Lyman, T. R., & Rosenberg, R. (2003). Guiding principles on regulation and supervision of microfinance: CGAP.
Christen, R. P., & Rosenberg, R. (2000). Regulating microfinance - the options. Small enterprise development, 11(4), 4-23.
Conroy, J. D. (2000). Indonesia. In The role of Central Banks in microfinance in Asia and the Pacific: Vol. 2, Country Studies (pp. 92-125): Asian Development Bank.
Conroy, J. D. (2003). The challenges of microfinance in Southeast Asia: The Foundation for Development Cooperation.
Cook, P., & Minogue, M. (2003). Regulating for development: Institute of Development Study, University of Sussex.
Cull, R., Demirguc-Kunt, A., & Morduch, J. (2007). Financial performance and outreach: A global analysis of leading microbanks. Economic Journal, 517(117), 107-133.
Demirguc -Kunt, A., Laeven, L., & Levine, R. (2004). Regulations, market structure, institutions, and the cost of financial intermediation
Journal of Money, Credit and Banking, 36(3).
Edgcomb, E. (1995). Financial Ratio Analysis of Microfinance Institutions. Toronto, CA: Calmeadow.
Fernando, N. (2005). Micofinance indusry in Asia: Achievements and Challenges: Asia Development Bank.
Fernando, N. (2006). Micro success story? Transformation of non-governmental organizations into regulated financial institutions, Manila
GAAP, The SEEP Network, & USAID. (2002). Definitions of Selected Financial Terms, Ratios, and Adjustments for Microfinance.
Gallardo, J. (2002). A framework for regulating microfinance institutions: The experiences in Ghana and the Philippines. Washington DC: World Bank.
Gilbert, L. M. (2000). The Philippines in ADB. In The role of Central Banks in Microfinance in Asia and Pacific (pp. 247-277): Op Cit.
Gilberto, M. L. (2000). The Philippines. In The Role of Central Banks in Microfinance in Asia and the Pacific: Vol. 2, Country Studies (pp. 247-277): Asian Development Bank.
Goodwin, R. (1998). The role of commercial banks in microfinance: Asia-Pacific region: Brisbane: Foundation for Development Cooperation.
Goronja, N. (2004). Regulation and supervision of microfinance. from www.cgap.org
Greuning, H. V., Gallardo, J., & Randhawa, B. (1998). A framework for regulating microfinance institutions. from www.worldbank.org
Greuning, V., Gallardo, J., & Randhawa, B. (1999). Framework for the regulation of microfinance institutions: World Bank Policy Research Paper, No.2061.
Grigorian, D. A., & Manole, V. (2002). Determinants of commercial bank performance in transition: World Bank policy research working paper 2850.
Gujarati, D. N. (2006). Essentials of economtrics (3rd ed.). New York: McGraw-Hill.
Hannig, A., & Katimbo-Mugwanya, E. (2000). How to regulate and supervise microfinance? Key issues in an international perspective
Bank of Uganda – German Technical Co-operation
Hartarska, V., & Nadolnyak, D. (2007). Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence. Applied Economics, 2007(39), 1207-1222.
Hishigsuren, G. (2005). Transformation of Micro-finance operations from NGO to regulated MFI. from http://ideas.repec.org/
Holloh, D. (1998). Microfinance in Indonesia: between state, market and self-organization. Hamburg, Lit Verlag: Transactions.
Llanto, G., M. (2000). Vietnam in ADB. In The role of the Central Bank in microfinance in Asia and the Pacific. Volume 2 (Country studies) (pp. 334-356).
Llanto, G., M. (2001). Sustainable rural finance: Policy and design issue. Manila: Philippine Institute for Development Study.
Maddala, G. S. (1988). In Introduction to Econometrics (pp. 226). New York: Macmillan.
Meyer, R. L. (2002). Track record of financial institutions in assisting the poor in
Asia: ADB Institute Research Paper, No 49, December 2002.
Microfinance, A. R. C. f. (2005). Microfinance in Indonesia – An example of successful commercial microfinance (Publication., from BWTP - Banking with the Poor: www.microfinancegateway.com
Pasiouras, F., Gaganis, C., & Zopounidis, C. (2006). The impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings: A cross-country analysis. Review of Quantitative Finance and Accounting, 27(403-438).
Robinson, M. (2002). Volume 2: Lessons from Indonesia. Paper presented at the The microfinance revolution

Rosenberg, R. (2002). Core performance indicators for microfinance: CGAP.
Schramm, C. J. (2008). Economic Fluidity: A Crucial Dimension of Economic Freedom. In Index of Economics Freedom 2008: The Heritage Foundation.
Stachen, S. (2003). Regulation and supervision of microfinance: A comparision of legal frameworks in 11 countries worldwide: Eschborn: GTZ.
Staschen, S. (1999). Regualtion and supervision of microfinance institutions: State of knowledge: Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ).
Stauffenberg, D. V., Jansson, T., Kenyon, N., & Barluenga-Badiola, M. C. (2003). Performance indicators for microfinance institutions (3rd ed.). Washington, D.C: MicroRate & Inter-American Development Bank

Steel, W. F., & Andah, D. O. (2003). Rural and microfinance regulation in Ghana: Implication for development and performance of the industry. Washington, DC.
UNDP. (2006). Vietnam at a glance. from http://www.undp.org.vn/undpLive/Content/UNDP/About-Viet-Nam
WorldBank. (2006). Country briefs: Vietnam. from www.worldbank.org
WorldBank. (2007). Country briefs: Cambodia. from www.worldbank.org
Wright, G. (2000). Microfinance systems: Designing quality financial services for the poor. London: Zed Books.
Ynus, M. (2007). Grameen Bank at a glace. from http://www.grameen-info.org/bank/GBGlance.htm
Zeller, M., & Meyer, R. (2002). Improving the performance of microfinance: Financial sustainability, outreach and impact. In Zeller, M. & Meyer, R. L.: The triangle of microfinance Baltimore: The Johns Hopkins University Press.