The Governance of Non-Profit Micro Finance Institutions: Lessons from History

Journal of Management and Governance

43 Pages Posted: 10 Nov 2008 Last revised: 3 Mar 2015

Date Written: November 9, 2008

Abstract

Microfinance is high on the public agenda, and better corporate governance has been identified as a key factor for enhancing the viability of the industry. However, recent literature on the subject struggles to identify the corporate governance mechanisms that influence the performance of the Micro Finance Institutions (MFIs). Guided by stakeholder and agency theories, this paper uses a historical parallel found in savings banks to present corporate governance lessons for not-for-profit MFIs today. The findings indicate that monitoring by bank associations, depositors, donors, and local communities was important in securing the survival of savings banks. In addition, a willingness to expand their mission to serve wealthier customers alongside the poor helped the banks become financially viable. These findings could prompt a rethinking of microfinance governance, which stresses regulation, for-profit ownership, and traditional vertical board control. The paper argues that a broader and more stakeholder-based understanding of corporate governance is necessary. Moreover, the paper demonstrates that historical studies can provide governance lessons for today.

Keywords: Microfinance, MFI, non-profit organisations, governance, savings banks, history

JEL Classification: B15, G21, G28, G32, O16,

Suggested Citation

Mersland, Roy, The Governance of Non-Profit Micro Finance Institutions: Lessons from History (November 9, 2008). Journal of Management and Governance. Available at SSRN: https://ssrn.com/abstract=1298613

Roy Mersland (Contact Author)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

HOME PAGE: http://www.uia.no/microfinance

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