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Outreach and profitability of microfinance institutions: the role of governance

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  • Anthony Kyereboah-Coleman
  • Kofi A. Osei
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    Abstract

    Purpose – This paper aims to examine how selected governance indicators impact on performance measures of outreach and profitability in microfinance institutions (MFIs). Design/methodology/approach – The paper adopts a quantitative approach based on both primary and secondary data from conveniently sampled 52 microfinance institutions. A panel data technique is employed as the key analytical framework. Findings – It is shown that governance plays a critical role in the performance of MFIs and that the independence of the board and a clear separation of the positions of a CEO and board chairperson have a positive correlation with both performance measures. Research limitations/implications – It would have been appropriate to have a larger number of MFIs for the study. This limitation however does not compromise on the validity of the conclusions based on the findings of the study. Practical implications – In the context of multi-dimensional and sometimes conflicting objectives facing MFIs, a clear balancing act of social objectives and institutional sustainability to ensure effective performance of MFIs is recommended. Originality/value – Studies on governance and its relationship with firm behaviour is limited especially in Sub-Saharan Africa. Its application in the microfinance sector with its peculiar characteristics is the added value of this paper.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

    Volume (Year): 35 (2008)
    Issue (Month): 3 (July)
    Pages: 236-248

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    Handle: RePEc:eme:jespps:v:35:y:2008:i:3:p:236-248

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    Related research

    Keywords: Corporate governance; Finance; Ghana; Performance management;

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    Cited by:
    1. Ben Soltane BASSEM, 2011. "Governance Quality and MFIS Repayment Performance," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 159-168, December.
    2. Janda, Karel & Turbat, Batbayar, 2013. "Econometric Analysis of Profitability of Microfinance Institutions in Selected Asian Countries," MPRA Paper 51430, University Library of Munich, Germany.
    3. Inoue, Takeshi & Hamori, Shigeyuki, 2011. "Financial permeation as a role of microfinance : has microfinance actually been helpful to the poor?," IDE Discussion Papers 299, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Janda, Karel & Turbat, Batbayar, 2013. "Factors Influencing Portfolio Yield of Microfinance Institutions in Central Asia," MPRA Paper 49549, University Library of Munich, Germany.

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