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Maturity Mismatch and Governance of Microfinance Cooperatives: Lessons from History

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Listed author(s):
  • Anaïs A Périlleux

Abstract

This article shows how today’s West African microfinance cooperatives could learn from the experience of 19th century German financial cooperatives (FCs) to address their members’ need for long-term loans, especially in rural areas. FCs have short-term internal resources, consisting mainly of members’ savings. Thus, providing long-term loans requires dealing with a maturity mismatch, which in turns leads to governance issues. The 19th century German FCs provided long-term loans (10 years and more) thanks to two mechanisms: the liquidity facilities provided by regional centrals and an efficient corporate governance system based on cooperative auditing associations. We discuss the feasibility of implementing those mechanisms in today’s West African microfinance cooperatives and come up with practical policy-oriented recommendations.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/54001/1/RePEc_sol_wpaper_10-005.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 10-005.RS.

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Length: 28 p.
Date of creation: 2010
Publication status: Published by:
Handle: RePEc:sol:wpaper:10-005
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Keywords: Microfinance; Cooperative; Governance; long-term loan; maturity mismatch;

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  8. Carlos E. Cuevas & Klaus P. Fischer, 2006. "Cooperative Financial Institutions : Issues in Governance, Regulation, and Supervision," World Bank Publications, The World Bank, number 7107, June.
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  11. Chris Cornforth, 2004. "The Governance of cooperatives and mutual associations: a paradox perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(1), pages 11-32, 03.
  12. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
  13. Timothy W. Guinnane, 2002. "Delegated Monitors, Large and Small: Germany's Banking System, 1800–1914," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 73-124, March.
  14. Anaïs Périlleux & Eddy Bloy & Marek Hudon, 2010. "Productivity Surplus Distribution in Microfinance: Does Ownership Matter?," Working Papers CEB 10-036, ULB -- Universite Libre de Bruxelles.
  15. Timothy W. Guinnane, 2005. "Regional Banks for Micro-Credit Institutions: Centrals in," 2005 Meeting Papers 74, Society for Economic Dynamics.
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