Role of gender on the performance of Indian microfinance institutions

Abstract

Purpose Microfinance institutions (MFIs) are known for their contribution to the women empowerment and poverty alleviation but it is not clear about the role of gender on the performance of this industry. It is important to explore the representation of both the gender in three levels, namely, decision-making, day-to-day management and implementation of the micro-financial services. This study aims to examine the impact of female board members, female managers and female field officers on the financial and social performance of the MFIs. Design/methodology/approach The authors have used random effect panel data analysis. The study covers 104 MFIs operating in India. The time period of the analysis is from 2010 to 2014. Findings The study has shown that as the number of female directors within the board increase there is an increase in cost per borrower. This is an indication that more female clients are being targeted. The increase in number of female managers leads to an increase in the number of active borrowers. The increase in the number of female staff members leads to an increase of operational self-sufficiency and yield of the gross portfolio. Research limitations/implications The present study has faced a lot of limitation due to the non-availability of the secondary data on the governance system of the microfinance industry. The study could not be undertaken for an extended period because of the unavailability of data for a long period. Practical implications This study has highlighted the role of gender in case of performance of microfinance institutions. The gender diversity at the field level has shown to enhance the financial performance of the MFIs. So, the MFIs should try to bring gender diversity at the operation level. Social implications This study has shown that an increase of woman directors at the board level increase female clients of MFIs. The increase of female managers also enhances number of female clients. So, the gender diversity at the managerial level and director level help MFIs to meet their social performance by reaching to more number of needy female clients. Originality/value The gender diversity at the three levels, namely, board level, managerial level and field operation level has not been analyzed in the Indian context. In India MFIs mainly target the female clients so in this context having gender diversity at the three levels of operation of the MFIs, which can improve both the financial and social performance of the MFIs.

Female Advantage? Management and Financial Performance in Microfinance

“…Our findings therefore suggest that the female influence on financial performance might be concentrated away from the upper echelons of the MFIs' management team. This is in line with the outcomes of other literature, which has found that gender diversity in lower-level management is an important aspect to consider (Dwyer et al 2003, Ghosh andGuha 2019), as well as research which has found that female supervisors improve the financial performance of organizations (Adams and Ferreira 2009, Krishnan and Park 2005, Cordeiro and Stites-Doe 1997, Catalyst 2004. Important decision making can thus be of influence below the top level of the organization (Fama and Jensen 1983).…”

“…Recent researches indicates that MFIs' management systems would improve with an increased female presence (Bassem 2009, Strom et al 2014, Hartarska et al 2014, Vishwakarma 2017, Ghosh and Guha 2019. This is an important issue since the MFIs are female-oriented on the customer side, in fact about 70 percent of all microfinance borrowers are women (Armendáriz andMorduch 2007, Reed 2011).…”

The experiences leading to resignation of female audit managers: an interpretative phenomenological analysis

“…To improve gender diversity, several countries have established gender quotas to increase the representation of women on the boards of companies, whilst others have introduced nonbinding gender quotas in their corporate governance codes (Terjesen et al, 2015). Research has found positive associations between gender diversity in senior positions and companies' financial performance (Arioglu, 2020) and social performance (Ghosh and Guha, 2019). Furthermore, women's presence on corporate boards is associated with improved governance, accountability and effectiveness (Baalouch et al, 2019).…”

Participation of women in the South Asian microfinance industry: An observation

“…Based on the organizational ladder of MFIs, women can participate in three different important management positions – board members, managers, and loan officers (see Figure 1). Behavioral economics suggest the presence of a variation in economic decisions between male and female (Hartarska, Nadolnyak, & Mersland, 2014), and that the effects of women on various dimensions of MFIs performance (e.g., financial sustainability & social outreach) were significantly positive in general (Augustine et al, 2016; Boubacar, 2019; Ghosh & Guha, 2019; Gudjonsson, Kristinsson, Gylfason, & Minelgaite, 2020; Strøm, D'Espallier, & Mersland, 2014).…”

“…Although, the role of women on the performance of MFIs is well established through rigorous and empirical research (Adusei, Akomea, & Poku, 2017; Bibi, Balli, Matthews, & Tripe, 2018; Boubacar, 2019; Ghosh & Guha, 2019; Gudjonsson et al, 2020; Memon, Akram, & Abbas, 2020; Pedrini, 2018; Vishwakarma, 2017), very little is known of the manifestation of women in the management role and clients base of the South Asian microfinance market. With the recent and remarkable progress in socio‐economic development of the South Asian countries, it is deemed important to examine how it has impacted gender diversity, particularly in the MFIs workforce.…”