Performance and Trade-offs in Microfinance Organizations - Does Ownership Matter?
Journal of International Development, Vol. 20, pp. 598-612, 2008
28 Pages Posted: 14 Mar 2007 Last revised: 21 Dec 2010
Date Written: January 30, 2007
Policy advocates argue the case for the transformation of non-government Microfinance Organizations (MFOs) into shareholder owned firms. The argument is that this will bring about superior performance. This paper investigates whether the superiority of shareholder owned MFOs is empirically supported. The findings indicate that the difference between shareholder owned MFOs and non-government MFOs is minimal. Our results contradict established paradigms and policy guidelines in the industry. However, the results are not necessarily surprising since ownership theories do not predict a clear preference for one type of ownership in the microfinance market. Furthermore, findings in general banking markets as well as the pro-poor banking history indicate that mutual and non-profit ownership can compete successfully with investor ownership.
Keywords: microfinance, performance, outreach, trade-offs, transformation, ownership, corporate governance
JEL Classification: G32, O16, G21, O17
Suggested Citation: Suggested Citation