Boards in microfinance institutions: how do stakeholders matter?
- PDF / 295,989 Bytes
- 29 Pages / 439.37 x 666.142 pts Page_size
- 84 Downloads / 223 Views
Boards in microfinance institutions: how do stakeholders matter? Neema Mori • Roy Mersland
Ó Springer Science+Business Media, LLC. 2011
Abstract Microfinance Institutions provide financial services to poor people. Governance of these organizations is important so that they can operate efficiently and sustainably. This study analyzes the influence of stakeholders (donors, employees, customers, and creditors), on board structure (board size and CEO duality), and on organizational performance. We use a global data set of 379 microfinance institutions from 73 countries, collected from rating organizations. Supported by stakeholder theory, agency theory and resource dependence theory, we find stakeholders to be important and have various influences on microfinance institutions. We find donors to be associated with small boards, non-duality and better performance. Employees are associated with large boards, while customers are associated with duality and good financial performance. Creditors opt for duality and better social performance. Implications and areas for future research are discussed. Keywords Microfinance institutions Stakeholders Board structure Performance JEL Classification
G21 G30
1 Introduction Microfinance institutions (MFIs) provide financial services to poor families and microenterprises. Access to microfinance has the potential to help poor people N. Mori (&) R. Mersland Faculty of Economics and Social Sciences, University of Agder, Postboks 422, 4604 Kristiansand, Norway e-mail: [email protected] N. Mori University of Dar es Salaam Business School, Dar es Salaam, Tanzania
123
N. Mori, R. Mersland
smooth consumption, mitigate risks, build assets and improve income. The building of a self-sustaining microfinance industry is high on the policy agenda (Cull et al. 2009). Still, most MFIs struggle to keep afloat financially without subsidies. Various policy papers indicate the importance of governance to the performance of MFIs (Labie and Mersland 2011), and industry actors rate ‘‘governance’’ among the most important risk factors in the industry (CSFI 2011). However, relatively little is known on the empirical relation between governance structures and MFI performance. This study responds to the need for more knowledge on how stakeholders influence the board structure and performance of MFIs. Particularly, this study responds to Labie and Mersland (2011), who argue for a more stakeholder-based approach to determining ‘‘who’’ and ‘‘what’’ really count in the governance and performance of MFIs. MFIs are private organizations incorporated as non-governmental organizations (NGOs), member-based cooperatives or banks1 (Mersland 2009). This means that the stakeholders who are represented on boards may vary depending on the type of the MFI. In addition, Labie and Mersland (2011) suggest that good governance is not only based on the ability to ensure the sustainability of the organization, but also on strategic vision and transparency. The authors further suggest that this is possible when organiza
Data Loading...
