Governance and performance of MFIs: the Cameroon case

Abstract

The main challenge of microfinance institutions and social economy firms remains their survival, and to meet this challenge, MFIs need to be competitive. The poor performance of MFIs is usually attributed to their decision-making and operational processes. The governance of MFIs is therefore identified as one of their main risks. Despite this, governance is still little explored in these organizations and empirical studies find a weak relationship between classical governance mechanisms and MFI performance, especially for the MFIs situated in Africa (Thrikawala et al., 2013a). In this study, we examine whether the effect of governance mechanisms on the performance of MFIs differs according to their legal status in the Cameroonian context. On the one hand, our empirical results show that there is a significant relationship between some specific governance mechanisms and MFIs' performance. On the other hand, adjusting the governance mechanisms according to the MFIs' legal status improves their efficiency. The analysis of the impact of the governance mechanisms on the performance of MFIs requires not only an approach that is specific to this sector but also an approach that is adapted to their legal status. Moreover, from a managerial point of view, it would be desirable to adjust the governance mechanisms, depending on the legal status of the MFIs, to make them more efficient from the social as well as the financial standpoint.

Solidarity economy cooperatives: The impact of governance and gender on member income

“…Morais et al (2017) show that women are the driving force in SEOs like SECs. By contrast, Wamba et al (2018) show that the presence of women has a negative effect on the social and financial performance of these organizations. This fuzziness is troubling, considered that gender equality is endemic to the very concept of SECs (Gaiger et al, 2015; Kawano, 2020).…”

“…Gender does not play a role in this configuration, but democracy and specialization appear as conditions that complement formalization and member selection policies . Specialization may amplify efficiency by organizing working groups that support specific activities and operationalize processes and plans (Pansera & Rizzi, 2020; Wamba, Bengono, Sahut, & Teulon, 2018). The role of democracy is widely acknowledged in SECs and SEOs (Defourny & Nyssens, 2017; Gordon, 2015) because it allows active participation in decision‐making and goal setting.…”

“…The possible causes for our results on gender vary. First, women tend to have greater aversion to risk and, therefore, might avoid actions that could foster positive results (Wamba et al, 2018). Second, there might be multiple barriers to de facto female leadership that women face in social (and traditional) enterprises (Shaiko, 1997).…”

Microfinance governance: a systematic review and future research directions

“…Our endeavour found that around 16 of the 42 reviewed articles with theories applied the agency theoretical lens only and related it to different sets of CG actors. Grounded on agency theoretical underpinning, studies mainly looked into the conflicting interests of two diverse groups, commonly known as principals (owners) and agents (managers) (Hartarska, 2005; Kyereboah-Coleman and Osei, 2008; Tchakoute-Tchuigoua, 2010; Thrikawala et al , 2016a; Wamba et al , 2018) to mention a few. These studies, motivated by agency theory framing, have provided us with a rich insight into board monitoring and control of MFI managers (agents).…”

“…However, empirical evidence of this relationship is incongruent. For instance, some studies found that governance structure positively influences the performance of MFIs (Allemand et al , 2013; Augustine, 2012; Augustine et al , 2016; Chakrabarty and Bass, 2014; Dato et al , 2018; Kyereboah-Coleman and Osei, 2008; Mori et al , 2015; Nihel and Younes, 2015; Pascal et al , 2017; Strøm et al , 2014; Tchakoute-Tchuigoua, 2010; Thrikawala et al , 2016a, 2017; Wamba et al , 2018) to mention few. Other studies found that governance structure both positively and negatively affects MFI performance (Abate et al , 2014; Bakker et al , 2014; Bassem, 2009; Van Damme et al , 2016; Estapé-Dubreuil and Torreguitart-Mirada, 2015; Gohar and Batool, 2015; Hartarska, 2005; Hartarska and Mersland, 2012; Mersland and Strøm, 2009).…”