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Published byMatthew Singleton Modified over 9 years ago
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13.12.2015 Seite 1 Seite 1 Corporate Governance for Microfinance
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13.12.2015 Seite 2 Page 2 Why Corporate Governance? 1 Separation between ownership and management The principal-agent problem information asymmetry incomplete contracts moral hazard
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13.12.2015 Seite 3 Page 3 Why Corporate Governance? 2 The Board minimizes Agency risks A system for the direction and control For shareholders and non-shareholders (depositors, etc.)
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13.12.2015 Seite 4 Page 4 Two models of Governance Shareholder Centric Stakeholder Centric Short and long term value creation for shareholders Hard-nosed commercial profitability Single tiered board (no separate supervisory board) Value maximization for a broader set of stakeholders The organization is seen to have a public responsibility Emphasis on long term growth Two-tiered board (separation of the executive board and supervisory board
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13.12.2015 Seite 5 Page 5 Two models of Governance A MFB board must be a stakeholder board because MFBs are managing public funds and are there to serve the poor and those who have been excluded from financial services. There is no other justification for a enabling a bank to be established with a very low capital requirement apart from banking on proximity and local knowledge that bridges the information between the bank and its customers.
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13.12.2015 Seite 6 Page 6 Roles and responsibilities of the Board for good governance Vision, Mission and Values Strategy with quantified objectives Hire top management and evaluate performance
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13.12.2015 Seite 7 Page 7 Roles and responsibilities of the Board for good governance Monitor risk management and internal controls Promote awareness of the mission and values Establish a two tiered board with gender sensitive structures Disclosure to shareholders and stakeholders
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13.12.2015 Seite 8 Page 8 Roles and responsibilities of the Board for good governance Ensure accurate financial reporting Undertake an annual review of mission, strategy, risks, SPM (single report format) Insist on the double bottom line with SPM
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13.12.2015 Seite 9 Page 9 Appropriate relationship between the board and management? The function of the board is leadership AND oversight- but not micromanagement.
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13.12.2015 Seite 10 Page 10 What are the major governance problem areas in Nigerian MFBs? 1 Loans to insiders and related parties Nontransparent hiring practices President keeping the cheque book Political party influence
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13.12.2015 Seite 11 Page 11 What are the major governance problem areas in Nigerian MFBs? 2 Manipulated reporting Concentrated ownership structure - one owner bank with and no stakeholder representation Infrequent board Meetings Absence of Social Performance Monitoring
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13.12.2015 Seite 12 Page 12 What is the cost of good governance? Monitoring costs Training costs Enforcement costs
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13.12.2015 Seite 13 Page 13 What are the benefits of good governance? Good reputation (client retention and increase) Fairness in lending practices Transparency in reporting financial results Asset protection Value creation for shareholders and stakeholders
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