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

See all articles by Roy Mersland

Roy Mersland

University of Agder

R. Øystein Strøm

OsloMet - Oslo Metropolitan University

Date Written: January 30, 2007

Abstract

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

Mersland, Roy and Strøm, Reidar Øystein, Performance and Trade-offs in Microfinance Organizations - Does Ownership Matter? (January 30, 2007). Journal of International Development, Vol. 20, pp. 598-612, 2008. Available at SSRN: https://ssrn.com/abstract=970513

Roy Mersland (Contact Author)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

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

Reidar Øystein Strøm

OsloMet - Oslo Metropolitan University ( email )

P.O. Box 4
Oslo, 0130
Norway
+47 97968500 (Phone)

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