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Papers presented at the

UNCITRAL International Colloquium on Microfinance
Creating an Enabling Legal Environment for Microbusiness
Vienna, 16-18 January 2013

16 January

Welcome address - Mr. Renaud SORIEUL, The Secretary, UNCITRAL

09:45-12:30 - An enabling environment for microbusiness and the rule of law

Moderator: Mr. Timothy LEMAY / UNCITRAL Secretariat

Mr. Luis Vélez CABRERA / Superintendencia de Sociedades (Colombia) - El problema de la economía informal y el estado de derecho

Prof. Maria Chiara MALAGUTI / Universitá Cattolica del Sacro Cuore (Italy) - Access to finance, retail payments and enabling legal environment

Prof. Soogeun OH / Ewha Womans University (Republic of Korea) - Microfinance and Microbusiness - From Global Rule Making Perspectives

Ms. Vanesa SANCHEZ / Economist Intelligence Unit (United Kingdom of Great Britain and Northern Ireland) - Global microscope on the business environment for microfinance - Evaluating the legal environment for microfinance

Mr. Alex IVANČO / Ministry of Trade and Industry (Czech Republic) - Legal environment for microbusiness

Mr. Michael J. DENNIS / Office of the Legal Adviser (United States of America) - An enabling environment for microbusiness and rule of law

After marking the distinction between public regulation and private law aspects of microfinance (looking back to the UNCITRAL Colloquium in January 2011), the session provided an overview of the distinctive features of an enabling legal environment for microbusiness and placed them in the context of UNCITRAL's mandate and activities. Current predominant trends in microfinance were also highlighted.

14:00-17:00 - Facilitate incorporation and registration of potential micro-borrowers: creating an enabling legal environment for micro, small and medium enterprises

I. Overview

II. The "rule of law"

III. Simplified business forms, innovation and economic growth

IV. Experiences across different jurisdictions

Moderator: Mr. Wade CHANNELL / United States Agency for International Development (USAID)

Prof. Francisco SATIRO / Universidade de São Paulo (Brazil) - Brazilian Experience

Prof. Francisco REYES / Pontificia Universidad Javeriana (Colombia) - SAS - Simplified Stock Corporation

Prof. Erik VERMEULEN / Tilburg University (Netherlands) - The UNCORPORATION - A revolutionary vehicle for microbusiness and microfinance

A large portion, perhaps the majority, of the world's micro entrepreneurs operate informally, making it difficult for them to access finance and markets as well as business incentives. They are often unable to create a legal identity, limit their liability, associate with other entrepreneurs to integrate capital, access financial mechanisms to obtain liquidity, extend credit; contract with employees, suppliers and customers, or access export opportunities. And many times, national legislative reform in this area applies business approaches from the past which lack the flexibility to cope with the new economic realities. The session discussed new simplified business forms and the relevant legislation to support them, and provided examples of countries that have already developed a legislative framework on these matters.

17 January

09:30-12:30 - Facilitate incorporation and registration of potential micro-borrowers: simplified business forms in the context of microfinance

I. The importance of simplified incorporation:

a. Relaxed incorporation requirements and informality

b. Limited liability

c. Capital structure

II. Freedom of contract and shareholder agreements

III. Conflict resolution and third party protection

Moderator: Prof. Erik VERMEULEN / Tilburg University (Netherlands)

Ms. Priyanka PRIYDERSHINI / Tilburg University (Netherlands) - UNCORPORATION

Mr. José M. MENDOZA / Superintendencia de Sociedades (Colombia) - Institutional bypass and third party protection

Prof. Philippe DELEBECQUE / Université de Paris I, Pantheon-Sorbonne (France) - L'entreprise individuelle en droit français

Prof. Sofia VALE / Universidade Agostinho Neto (Angola) - Facilitate incorporation and registration of potential micro-borrowers: Overview of the Angolan legal framework

Dr. Leif BÖTTCHER / Federal Ministry of Justice (Germany) - Simplified business forms in the context of small and medium enterprises - the German approach

The session continued the discussion of the previous afternoon, focusing on various distinctive features of the simplified business entities.

14:00-15:30 - Setting up an effective alternative dispute resolution mechanism for micro-entrepreneurs

Moderator: Prof. Giuditta CORDERO MOSS / University of Oslo (Norway)

Mr. Daniel MAGRAW / Center for International Environmental Law (United States of America) - Transparency and Dispute Settlement for Micro-Entrepreneurship

Ms. Suzanne ROACH / Financial Services Ombudsman (Trinidad and Tobago) - Office of the financial services ombudsman

Prof. Yoshihisa HAYAKAWA / Rikkyo University (Japan) - Dispute resolution for microfinance disputes

Mr. Felipe CUBEROS / prietocarrizosa (Colombia) - Mecanismos alternativos de solución de conflictos

An integral component of financial services client protection, the provision of effective, alternative dispute resolution (ADR) mechanisms for micro entrepreneurs, is often unavailable. The access to justice gap for the poor is so large that new, innovative and more efficient dispute resolution systems should be developed which are tailored to the low incomes, literacy levels, geographical and cultural constraints of the poor. The session analysed the sorts of claims arising in the context of microfinance; discussed the features an ADR system should have to operate in such a context and provided examples of countries where ADR systems in the microfinance sector exist, their achievements and challenges.

15:45-17:00 - An enabling legal environment for mobile payments and peer-to-peer networks

Moderator: Ms. Irene PHILIPPI / Department of Treasury (United States of America) - An enabling legal environment for mobile payments and peer-to-peer networks

Ms. Narda SOTOMAYOR / Superintendencia de Banca, Seguros y AFP (Peru) - An enabling legal environment for mobile payments. The Peruvian Experience

Mr. Brian MUTHIORA / Safaricom Limited (Kenya) - An enabling legal environment for mobile payments and peer to peer networks. The Kenyan Experience

Mr. Jayantha FERNANDO / ICTA (Sri Lanka) - Enabling legal environment for mobile payments. Sri Lankan perspective

Ms. Monica HARUTYUNYAN / Consultative Group to Assist the Poor (CGAP) - Legal Environment for Branchless Banking, including Mobile Payments, Implications for Financial Inclusion

Progress in electronic communications has had significant influence, including in the field of payment systems. Growth in this sector has been very rapid, particularly in developing countries, where large percentages of the population are unbanked. New devices for money transfer and provision of financial services (such as mobiles, internet or stored-value devices) as well as the entry of new operators into the market have profoundly modified both the regulatory and the legal landscape. The session discussed the main legal issues surrounding electronic transfers (of which m-payments are a subset), in particular focusing on the role of service providers and the apportioning of the risks between providers and clients.

18 January

09:30-12:30 - Legal issues relating to access to credit for micro-business, small and medium-sized enterprises:

I. Cross-cutting themes:

a. Transparency and fairness: facilitating the use of and ensuring transparency and fairness in lending, including secured lending, to microenterprises and small enterprises

b. Credit bureaus

c. Branchless/Mobile Banking

II. Secured credit in the context of microfinance: valuation of collateral, registration of a security interest, fair and transparent enforcement of a security interest, relevant legal framework

Moderator: Mr. Spyridon BAZINAS / UNCITRAL Secretariat

Ms. Azish FILABI / Federal Reserve Bank of New York / New York State Bar Association, International Section (United States of America) - Price transparency & truth-in-lending

Mr. Fabrizio FRABONI / International Finance Corporation (IFC) - Harnessing the power of credit reporting systems

Mr. Marek DUBOVEC / National Law Center for Inter-American Free Trade (United States of America) - Microloans and the function of collateral

Prof. Maria del Pilar BONILLA ROBLES / Universidad Francisco Marroquín (Guatemala) - Garantías mobiliarias y empresarios

Mr. José Maria GARRIDO / World Bank - Secured credit and micro-enterprises

Mr. Chuck WATERFIELD / Microfinance Transparency (United States of America - Transparent pricing and the microloan price curve

In many countries, establishing a fair, reliable and transparent lending process for micro-borrowers implies multiple challenges, including the lack of traditional sources of client information, the transparency of financial products and services, the use of agent banking. When microfinance involves secured lending, in the context of which a micro business may be utilizing essential household items to secure loans for micro trade as well as consumption purposes, the nature of the borrower and the collateral may also pose challenges. For instance, valuation of collateral may not be easy; registration of security interests creates particular difficulties; enforcement and collection in the event of borrower default raises particular issues. The session provided due attention to MFIs often working in an uncharted legal territory, without appropriate guidelines regarding which laws are applicable to lending transactions with economically vulnerable borrowers. The application of secured transaction law in a microfinance context was in focus, with particular reference to the UNCITRAL Legislative Guide on Secured Transactions.

Presentation: Mr. José Maria GARRIDO / World Bank - The World Bank Report on the Treatment of the Insolvency of Natural Persons

14:00-15:30 - Establishing a legal framework that ensures orderly insolvency and winding up processes

I. Microbusiness insolvency and the insolvency of natural persons

II. Reinvigoration and reinsertion of the micro entrepreneur debtor in microbusiness: discharge and "fresh start"

III. Simplified alternatives to insolvency procedures for micro entrepreneurs

IV. Payments of claims:

a. Through liquidation of the estate

b. Through a payment plan

Moderator: Ms. Diana TALERO CASTRO / Superintendencia de Sociedades (Colombia) - Insolvency in Colombia

Mr. Luis Manuel MEJÁN / Haynes & Boone (Mexico) - An Insolvency regime for SMEs

Mr. Andres Federico MARTINEZ / International Finance Corporation (IFC) - Creating specific insolvency regimes for SMEs

Prof. Andre BORAINE / University of Pretoria (South Africa) - Various aspects to consider with regard to special insolvency rules for SMEs

Micro-, small- and medium- sized enterprises account for significant portions of the business activities of many economies. Resolving the financial difficulties of such enterprises may involve such significant challenges that walking away is the simplest and most popular option: commercial insolvency regimes are typically too complex and expensive for such small enterprises; consumer insolvency regimes may not exist or take insufficient account of the commercial nature of the debt; and debt counseling and related services may not go far enough. The session discussed issues and options of legal frameworks that deal with insolvency and winding up processes concerning micro and small entrepreneurs.

15:45-17:00 Concluding discussion: The way forward

Moderator: Mr. Timothy LEMAY / UNCITRAL Secretariat

Mr. Wade CHANNELL / United States Agency for International Development (USAID)

Prof. Francisco REYES / Pontificia Universidad Javeriana (Colombia)

Prof. Giuditta CORDERO-MOSS / University of Oslo (Norway)

Ms. Irene PHILIPPI / Department of Treasury (United States of America)

Mr. Spyridon BAZINAS / UNCITRAL Secretariat

Ms. Diana TALERO CASTRO / Superintendencia de Sociedades (Colombia)

Taking stock of the presentations and discussions of the three days, this last session outlined the key issues of a favourable environment for micro, small and medium-sized enterprises which UNCITRAL may wish to consider for future legislative work.