Corporate Governance – Performance Relationship in Microfinance Institutions (MFIs)

Asian Journal of Finance and Accounting, Vol. 5, No. 1, June 2013

23 Pages Posted: 20 Sep 2013

See all articles by Sujani Thrikawala

Sujani Thrikawala

University of Waikato

Stuart Locke

University of Waikato - Management School

Krishna Reddy

Australian Institute of Business

Date Written: January 23, 2013

Abstract

The relationship between governance and the performance of Microfinance Institutions (MFIs) is discussed in this paper. MFI performance encompasses both financial performance and outreach. Good governance in terms of strengthening stewardship, achievement of MFIs’ primary objectives and promoting further development of the industry have been asserted as key elements of the literature pertaining to MFI performance. Similarly, several cases concerning poor governance have been analysed.

Good corporate governance has been noted as even more important due to the demand for transparency and accountability of funds utilised in the microfinance activities. Further, MFIs need to have a solid governance framework to minimise the possibilities of management failures which may jeopardise the efficacious application of received funds from governments and donors.

In prior studies, the nature of corporate governance practised by MFIs is less understood and no substantive work using multiple MFI outcomes over a number of years has been undertaken. The concerns raised in reviews of individual MFIs and normative discussions of what should constitute best practice do point to the need for better understanding of the nature of corporate governance practised by the MFIs and also, to understand the nature of the relationship that exists between institutional success and corporate governance especially for developing countries. This study therefore identifies and provides a framework for undertaking corporate governance research relating to MFIs.

Keywords: Microfinance Institutions (MFIs), Corporate Governance Practices, Financial Performance, Outreach

JEL Classification: G30, G23

Suggested Citation

Thrikawala, Sujani and Locke, Stuart and Reddy, Krishna, Corporate Governance – Performance Relationship in Microfinance Institutions (MFIs) (January 23, 2013). Asian Journal of Finance and Accounting, Vol. 5, No. 1, June 2013, Available at SSRN: https://ssrn.com/abstract=2327979

Sujani Thrikawala (Contact Author)

University of Waikato ( email )

Private Bag 3105
Hamilton, 3105
New Zealand

Stuart Locke

University of Waikato - Management School ( email )

Hamilton
New Zealand

Krishna Reddy

Australian Institute of Business ( email )

27 Currie Street
Adelaide, 5000
Australia
0061870891341 (Phone)

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