Tying the Knot: A Guide to Mergers in Microfinance

What are the secret ingredients to a successful merger?

The paper states that there is no secret ingredient that can ensure a successful merger. Much depends on how events unfold, and above all on those individuals who, by chance or circumstance, are drawn into the process and learn together how to implement and adapt to the change. Addressing merger process from practitioner?s perspective, the paper provides an in-depth look at the merger process in Armenia, examines the pros and cons, explores the lessons learned, and articulates some guidelines for other MFIs that might be contemplating a merger or similar strategic move in the future. It focuses on the factors to consider when deciding whether to merge, how to choose a merger partner, and how to examine both parties' strengths and weaknesses in light of what a merger would yield, legal aspects of microfinance mergers, post-merger integration, and the mechanics of merging MFI operations. Furthermore, it looks at merger goals and processes and says they can vary depending on the legal status of the institutions involved, as the merging parties can be two nonprofit MFIs, two formal financial institutions, or a combination involving these and/or some other type of institution. It also:

  • Examines the rise in bank mergers and the increase in nonprofit mergers, especially in the United States;
  • Summarises the types of mergers that have already become established in the microfinance industry around the world;
  • Discusses the dangers of mergers, reasons that mergers have failed, and the implications for those considering microfinance mergers in the future.

About this Publication

By McCarter, E.