Determinants of Board Structure in Microfinance Institutions: Evidence from East Africa

Mori, Neema; Randøy, Trond; Golesorkhi, Sougand

doi:10.1177/0972652713512916

Cited by 17 publications

(21 citation statements)

References 71 publications

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“…Several researchers have responded to the call for more knowledge on the governance of MFIs. The core interest of these studies has been the effectiveness of the link between board characteristics and MFI performance-such as board structure (Mori et al, 2013), board diversity (Hartarska, 2005;Hartarska & Mersland, 2012), board composition, CEO duality, and board size (Mersland & Strøm, 2009). These articles mostly look at how boards are structured and formed in terms of who sit on those boards, how large are the boards and how independent they are.…”

Section: Introductionmentioning

confidence: 99%

Board committees and performance in microfinance institutions

Dato

Mersland

Mori

2018

IJOEM

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Purpose The purpose of this paper is to empirically relate subordinate board structures with improved financial and social performance in microfinance institutions (MFIs). Design/methodology/approach The research question is analyzed using a panel data from 23 MFIs in Ethiopia over a period of 2006-2011. Random effects panel data estimation is applied to analyze the link between board committees and MFI’s performance. Findings In MFIs with larger than average boards, the findings demonstrate significant ties between ﬁnancial and outreach performance and how their boards are structured. The structure of board committees moderates the relation between board size and financial and outreach performance measures. Importantly, board committee benefits MFIs through better operational self-sufficiency, lower operating expenses, greater outreach to customers, and outreach to poorer customers using average loan size as the proxy. Practical implications Practitioners within microfinance sector, and those operating in advisory and regulatory roles to the sector could benefit from the argument advanced in the paper in that normative recommendation to restructure boards or establish committees requires reevaluating the board characteristics vis-à-vis the optimal monitoring, controlling, and advising needs of the institution. Originality/value Prior literature focuses on who sits on boards, how large are the boards, and how independent are they. This paper advances the understanding of the structure of board committees and how this may affect the performance of MFI. This approach provides better representation of director’s role and is thereby a good test of board effectiveness.

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Section: Introductionmentioning

confidence: 99%

Board committees and performance in microfinance institutions

Dato

Mersland

Mori

2018

IJOEM

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“…Certain microfinance services' suppliers in Uganda including; PRIDE, FINCA and Centenary Rural Development Bank are near to financial sustainability or have now surpassed it (Wright et al, 1998). Microfinance amenities contribute to reduced customer vulnerability to economic perils, contributes to firming linkages of clients and their families to the agricultural sector, rejuvenates economic well-being of areas previously under conflict and enables clients to acquire valued skills, (Hoxhaj, 2010;Strand, Kjøllesdal, & Sitter, 2010;Mori & Randoy, 2011). Sustainability in development and promotion of MFIs has been viewed as a promising development policy able to address market failures in formal banking systems (Basu, 2005).…”

Section: Other Relevant Scientific Issues To the Studymentioning

confidence: 99%

Capital Structure and Its Role on Performance of Microfinance Institutions: The Ugandan Case

Sekabira¹

2013

SAR

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Micro Finance Institutions (MFIs) rejuvenate economic prowess in developing countries, after severe shocks like wars, droughts and floods. MFIs are a promising tool to tackle poverty and improve food security. Sustainability of MFIs based on their capital structure ensures sustainability in poverty reduction and improved food security. The limited literature on the impacts of capital structures on MFI performance necessitated the study. Panel data from 14 MFIs was collected based on availability and accessibility. The sources of data were financial and income statements covering five years. Econometric analysis using STATA software was done following methodologies of Bogan and Rosenberg. MFIs lent to both individuals and groups and 79% were not regulated by the Central Bank, 86% had their funding sources as loans, grants, excluding deposits/savings and 73% attained operational self-sufficiency. Debt and grants were negatively correlated to operational and financial sustainability. When sustainability was more constricted to financial sustainability, debt and share capital remained noteworthy. Other than grants, debt was paid back on competitive market interest rates most especially debts from money lenders, whereas share capital fetched in revenues to the MFIs at market interest rates from the borrowers. Grants and debt had a substantialdamagingconsequence on MFI performance. Capital structure was essential in MFIs' sustainability. MFI specific characteristics, like management were also important. Subject to sampling uncertainties, the results indicate that adding to regulation by Central Bank, MFIs must specialize their lending to reduce portfolio at risk. MFIs must reduce dependence on debts and grants and resort to accumulating share capital for long-term sustainability.

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“…For instance, in their study, Mori et al (2013) investigated the individual and firm-level determinants of the MFI corporate board. Their study revealed that some corporate governance characteristics play a significant role in shaping the board structure of an MFI.…”

Section: Antecedents and Consequences Of Governancementioning

confidence: 99%

Microfinance governance: a systematic review and future research directions

Rasel¹,

Win²

2020

JES

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PurposeThe purpose of this article is to systematically review extant research on the corporate governance (CG) of microfinance institutions (MFIs) from a global perspective. In the process, it discusses scholarly contributions and highlights key issues from the findings of past studies on several governance attributes, in particular, their interconnections and influence on different institutional outcomes of the sector.Design/methodology/approachAlthough academic work on microfinance governance is substantial, prior studies lack a comprehensive approach to reviewing the literature on this topic. We adopted a systematic method to review past studies on microfinance CG by applying particular inclusion and exclusion criteria. In this regard, the study developed specific questions and sought to find their answers from the existing literature.FindingsThe findings from our research indicate that microfinance governance-performance relationship is the central focus of the majority of our reviewed papers, although a few attempts have been made to explain the interconnection between CG mechanisms at the firm and institutional level. Our findings also show that existing studies have used a variety of techniques to measure MFI performance vis-à-vis their hybrid mission, such as profitability and outreach. Moreover, the study found that common topics discussed in the mainstream literature include board structure, CEO characteristics, audit quality, external governance, disclosure and MFI ownership type.Research limitations/implicationsThis review has some limitations that warrant further research. First, we considered only peer-reviewed scientific publications for our systematic review. Second, we omitted non-English journal papers from our sample. In light of these limitations, we provide some future research directions that may shed further light on our current inquiry.Originality/valueThis paper evaluates past relevant studies using a systematic approach (in preference to the commonly used narrative approach) for a span of over eighteen years; thereby contributing significantly to the sectoral governance literature. This study is novel in that it offers new incentives and opportunities for further research in order to meet the shortcomings of reviewed papers from various theoretical, empirical, methodological and geographical standpoints.

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Determinants of Board Structure in Microfinance Institutions: Evidence from East Africa

Cited by 17 publications

References 71 publications

Board committees and performance in microfinance institutions

Board committees and performance in microfinance institutions

Capital Structure and Its Role on Performance of Microfinance Institutions: The Ugandan Case

Microfinance governance: a systematic review and future research directions

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