The Premier Source for Microfinance Data and Analysis This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Microfinance Information Exchange Results from testing new indicators on governance Micol Pistelli, MIX Social Performance Manager SPTF Webinar on Governance, 2011

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. First-blush review of Governance Survey Data Overview 1. The survey was focused on basic items (process and structure) to reduce the risk of subjective responses 2. Encouraging volume: 162 responses (with decent geographic distribution) 3. At first glance, patterns in responses appear reasonable (no/limited evidence of errors); that said, certain questions can/should be refined

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Baseline data Regional distribution: LAC = 59, South Asia=35, ECA= 30, EAP =16, Africa=14, MENA=8 Legal type: 75 NGOs, 57 NBFIs, 13 credit unions, 10 banks, 2 rural banks, 3 other, 2 unknown Median number of borrowers per MFI: 17,000. Average=150,000 [min – 200, max. 8 million] Job title of respondents: majority were CEO/Executive directors, head of financial departments/CFOs and head of sub departments (research, HR,etc).

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. First-blush findings (all subject to further analysis): Encouraging levels of independence and diversity of experience/qualifications for the average Board – further analysis will de-average the data to identify Boards with great, some or no breadth of experience The majority of Boards meet with reasonable frequency (4-12 times/year) The use of committees varies – further analysis will help uncover how the depth of use varies across Boards Exposure to lack of risk management or internal audit function among 40% and 20% of MFIs, respectively Reasonable levels of review/decisions in key policy areas (especially controls, client protection, compliance and funding sources

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Survey Questions (1 of 2) 1.How many members compose the BoD? 2.Are the CEO and Chairman of the Board the same person? 3.How many of your Board of Directors are independent? 4.Does at least one of your board members have: (formal financial qualification; formal legal qualification; more than 10 years experience in banking…) 5.How many times did the Board meet in 2010? 6.Within the past year, how many Directors attended each Board meeting (physically or by phone)? 7.Does the board have the following committee? (executive, risk, audit…)

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Survey Questions (2 of 2) 8.Do funders of the institution have voting or voice rights on any of these committees? (executive, risk, audit…) 9.Has the board formally appointed: a.A risk manager or a team dedicated to fulfill the risk management function? b.An internal auditor or a team dedicated to fulfill the internal audit function? 10.If the board has formally appointed a risk manager or a team dedicated to fulfill the risk management function, who does the manager or team leader report to? 11.In the past year, did the Board change policies concerning: (institutional transformation, senior executive succession, senior executive compensation or incentives…)?

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. CategoryYesNo Blank/I don’t know Formal financial qualification90%4%6% Formal legal qualification59%26%15% More than 10 years experience in banking69%19%12% More than 10 years experience in business80%10% More than 7 years experience in microfinance83%8%9% More than 5 years experience in market research52%23%25% More than 2 years experience in SP measurement and management 59%20%21% Example 1: Board qualifications These data show the percentage of MFIs who reported to have at least one board member with the qualifications listed in the table

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Example 2: Committees CommitteeYesNoBlanks Executive committee52%38%10% Risk committee48%40%12% Audit committee63%25%12% HR committee36%52%12% Remuneration committee34%49%17% Ethics committee26%57%17% Funding committee39%45%16% Transformation committee18%64%18% These data show the percentage of MFIs who reported to have each of the executive committees listed in the table

This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited. Most of the true analysis work remains to be completed and we have identified a number of hypotheses to be tested in the near term Next steps for analysis 1. Are Boards that lack a robust committee structure (e.g., <3 committees) a marker of worse MFI performance? Do MFIs with an executive, risk and audit committee have better financial performance? 2. Do MFIs whose BoD meet at least 5/6 times per year show a better financial performance? 3. Do MFIs with low-intensity governance (infrequent Board meetings and few/no committees) perform worse? 4. Do MFIs who appointed a risk manager or a team dedicated to fulfill the risk management function show better risk management? 5. Do Boards that lack diverse capabilities (few or no qualifications among Board Directors as per question 4) perform worse? 6. Do MFIs who appointed an internal auditor or a team dedicated to fulfill the internal audit function have a better risk management?

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