Guide / Toolkit

Guide for the Adoption of Good Governance Principles in Microfinance Institutions

Improving corporate governance in MFIs
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This paper highlights the mechanisms available to MFIs to implement a good corporate governance system and describes practical cases to help MFI directors achieve their strategic goals. It is targeted at members of MFI governing bodies interested in improving their institution's corporate governance practices.

The lack of suitable corporate governance policies is one of the main obstacles for the growth of the microfinance sector. Microfinance Banana Skins 2008, a benchmark publication to measure opinions and risks affecting the growth and viability of MFIs, ranked the lack of corporate governance policies as the second major risk for MFIs. MFI directors need to solve this problem by implementing specific initiatives to improve their institution’s corporate governance policy. The paper sets out guidelines to adopt good governance principles in MFIs. It is divided into three sections. These are: 

  • Introduce the concept of corporate governance and highlight the dual nature of an MFI’s social and financial goals;
  • Describe MFI governing bodies and their main duties;
  • Explain the mechanisms that must be considered to create and maintain an efficient Board of Directors committed to the institution’s good governance.

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