Corporate governance and performance of microfinance institutions: recent global evidences

Using a global data set of 456 MFIs, this study investigates whether a MFI’s ownership structure and corporate governance influences its social performance. An attempt has been made to analyze the impact of ownership structure of MFIs on its social performance, taking five indicators into consideration. The study is based on secondary data which are obtained from rating reports from the five micro lender rating agencies: MicroRate, Microfinanza, Planet Rating, Crisil and M-Cril etc. The hypotheses are tested by performing an unpaired sample t test to investigate the statistical significant difference between the two types of ownerships on social performance. The result shows that socially oriented MFIs (NGOs and cooperatives) have shown their stronger focus on social goals by having a higher percentage of female borrowers and a lower average loan size than commercially oriented MFIs (banks and NBFIs), which indicates the importance of ownership type for social performance of MFIs. The findings of this study can lead to important contributions that provide better understanding of the role of ownership structure as well as corporate governance in the MFIs’ performance. MFIs have mostly been evaluated on their financial performance and there are very limited number of previous academic studies on ownership structure in the microfinance sector and its impact on MFIs mission of social impact. This study aims to cover this gap in the literature by making a cross-country study of examining the influence of ownership structure on the social performance of MFIs.