http://deepblue.lib.umich.edu/bitstream/handle/2027.42/40063/wp677.pdf?sequence=2

Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States

This paper examines empirically the relation between governance mechanisms and the performance of Euro‐Mediterranean microfinance institutions (MFIs) in terms of outreach and sustainability. Specifically, we found that performance‐based compensation of managers is not associated with better performance of MFIs. The results identify trade‐offs between MFIs outreach and sustainability depending on larger board size, and on higher proportion of unaffiliated directors. Moreover, the study shows that the more women there are on the board the better the performance, and reveals that external governance mechanisms help MFIs to achieve better financial performance. This study also allows us to distinguish other factors leading to better sustainability such as Regulation, and the use of individual lending methodology. However, the MFIs, active as NGOs, seem to be more consistent with their social mission than with their financial performance.

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Governance and Performance of Microfinance Institutions in Mediterranean Countries

Purpose – Microfinance practitioners have emphasized that appropriate control mechanisms are critical for the success of a microfinance institution (MFI). The purpose of this paper is to study the effects of external governance mechanisms on MFIs' performance, whereby external governance is defined as the control exercised by stakeholders and markets, and accountability mechanisms that operate to enforce internal governance.Design/methodology/approach – This paper uses a database of 108 MFIs operating in over 30 countries and analyzes their performance by adopting an empirical approach usually employed in cross‐country banking research on the impact of market forces and regulation on performance. MFI performance is measured by sustainability and outreach indicators and is modeled as a function of external audit, microfinance rating, and regulatory status and controls for MFI and country‐specific characteristics.Findings – Results indicate that regulatory involvement and financial statement transparency do...

The impact of outside control in microfinance

It is estimated that donors commit between US$ 800 million and US$ 1 billion to microfinance per year. This paper analyses the management of microfinance institutions (MFIs) and its relationship with donors' subsidies. The results show that the level of subsidies granted per year is related to the management quality but not the subsidies divided by the gross loan portfolio or the total equity. Well-managed MFIs are larger and regulated organisations but not significantly older. The organisational structure or the experience of the MFI however does not play a role in determining its financial effectiveness, except for cooperatives. Copyright © 2009 John Wiley & Sons, Ltd.

Management of microfinance institutions: Do subsidies matter?

This study uses a unique hand-collected sample of for-profit and nonprofit microfinance institutions from 70 developing countries to analyse the relationships between audit quality and governance mechanisms. We examine two measures of audit quality, namely, the use of Big Four auditors and the presence of internal auditors. The empirical analysis of this study reveals that these two quality metrics are highly related, although we also demonstrate that these metrics capture distinctive aspects of audit quality. In particular, the presence of internal auditors is related to other indicators of stricter governance, whereas the use of Big Four auditors is generally unrelated to other governance mechanisms. For situations in which a significant relationship between audit quality and governance does exist, the sign of this relationship is always positive. Thus, our data support the complementarity view of these two traits that is espoused by prior research.

/pdf/audit-quality-and-corporate-governance-evidence-from-the-4sngwg20os.pdf

Audit Quality and Corporate Governance: Evidence from the Microfinance Industry

This article considers the policy and regulatory environment for microfinance in Asia. It identifies eleven criteria for ‘good practice’ in policy and regulation, covering the policies of governments and donor agencies to support microfinance; the regulation of non-bank microfinance institutions; and the regulation of banks. It then grades the performance of nine countries in Asia. It concludes that there is scope for improvement in all nine countries. Overall, Philippines and Bangladesh have the policy and regulatory environments that are most conducive to sustainable microfinance, while Pakistan has the one that is least conducive. However, different countries have strengths in different areas, and no country is strong in all areas. Copyright © 1999 John Wiley & Sons, Ltd.

Paul B. McGuire

Papers

Policy and regulation for sustainable microfinance: country experiences in Asia