Pros and cons of transforming into a share-capital company
Though the microfinance industry in the Arab World is well-established and growing, only a handful of Arab MFIs have transformed from not-for-profit to for-profit companies. The recent trend of introducing or improving the regulatory environment for MFIs in the Arab World has made the question of transformation more relevant than ever, and in some countries more than others.
This paper analyzes the possibility of transformation for MFIs in this region by exploring its advantages – including access to capital, increased outreach, improved efficiency, and governance – as well as disadvantages. It summarizes the experiences of some MFIs that have already undergone transformation, both inside and outside the region, and contextualizes what transformation would look like under the regulatory environments present in the Arab World. This paper speaks to MFI practitioners in the Arab World who may be pondering whether transformation is right for their organization and strives to address the concerns of MFIs that are weighing the pros and cons of transforming into a share-capital company.