Women’s presence in top management and the performance of microfinance institutions in West Africa

Abstract

Purpose The purpose of this paper is to investigate the relationship between the presence of women in senior management and the performance of microfinance organizations in the West African Economic and Monetary Union (WAEMU). Design/methodology/approach Using a data set of 266 microfinance institutions (MFIs) for the period 2013–2017, the study assesses the impact of women’s representation in senior management and on the boards of West African MFIs on these institutions’ financial and social performance. Findings The results indicate that board size and diversity positively and significantly affect the social performance of MFIs, particularly in relation to women’s participation in decision-making regarding expanding services to poor people. In essence, greater gender diversity at the board and management levels promotes the social orientation of MFIs. Research limitations/implications The low representation of women on boards and as managers makes it difficult to more accurately determine the true impact of women in senior positions on MFIs performance. Practical implications The author recommends minimum quotas for women in the top management of MFIs. This would help these institutions incorporate key skills and actively involve all members. Also, regulation places constraints on the ability of West African MFIs to mobilize deposits and this negatively impacts their financial performance. Originality/value This investigation highlights the importance of including women in the top management of MFIs to improve these institutions’ performance. It also underscores an interesting problem and answers questions raised in the existing literature by either rejecting or confirming the findings. As players in the microfinance sector recognize that board diversity is important for the success of any microfinance institution, this paper helps shed light on the situation of these organizations in the WAEMU. Peer review The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2019-0365

Effect of board gender diversity on the financial performance of microfinance institutions: Does judicial efficiency matter?

“…Approximately, a 1% increase in female representation on the boards of an MFI causes between 1% and 7% decline in its financial performance in the short run. These results contradict the studies that reported the positive influence of board gender diversity on the financial performance of MFIs (Bassem, 2009; Mersland & Strøm, 2009; Chakrabarty & Bass, 2014; Strøm et al., 2014; Augustine et al., 2016; Vishwakarma, 2017; Chen et al, 2018; Green & Homroy, 2018; Boubacar, 2019; Song et al, 2020) and uphold the negative effect hypothesis in the empirical literature (Adusei, 2019; Yang et al., 2019; Boehe & Cruz, 2013; Ujunwa, 2012). Therefore, hypothesis H 1 is unsupported.…”

“…Apart from female directors being more efficient and active monitors than male directors (Adams & Ferreira, 2009), they are also more independent because they are not part of the “old boys” network (Carter, Simkins & Simpson, 2003). As a result, they improve the performance of firms (Song et al., 2020; Boubacar 2019; Bennouri et al., 2018; Chen et al., 2018; Green & Homroy, 2018; Vishwakarma, 2017; Darko, Aribi & Uzonwanne, 2016; Strøm et al., 2014; Hartarska & Nadolnyak, 2012). The literature attributes this positive impact to the benefits of heterogeneity.…”

The capital structure–firm performance nexus: The role of judicial efficiency

“…We control for board size measured by the number of directors on the boards of MFIs. Most studies find evidence of improved financial performance with a larger board size (Boubacar, 2019; Datta et al, 2020; Kiel & Nicholson, 2003). Such studies argue from the resource dependency point of view that larger boards create better and more critical resources such as connections with key organizational stakeholders and other business partners, offering different opinions that can enrich debates, increase diversity in terms of gender, professional expertise, nationality, and so forth, which help improve corporate decisions and ultimately affect performance positively (Barnhart & Rosenstein, 1998; Pfeffer, 1972; Pfeffer & Salancik, 1978).…”

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.…”