In this role they are perceived to be playing a complimentary role to banks rather than competitors, as it is a known fact that majority of the population in the country do not yet have access to mainstream financial products and services including a bank account and therefore the country needs institutions beyond banks for reaching out in areas where banks’ presence may be lesser.
Because the sector is so heterogeneous, broad regulatory principles, rather than explicit reforms, have been developed that jurisdictions can apply to mitigate systemic risk – namely, to reduce procyclical behaviour and the likelihood of runs.