Boards in Microfinance Organizations: Do Stakeholders Matter?
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Description
Microfinance organizations provide financial services to low income people. Governance of these organizations is important for them to efficiently reach poor people and survive financially. Board is one among several governance mechanisms. This paper empirically analyses the influence of stakeholders who sit on boards, on financial and outreach results of microfinance organizations. Based on resource dependence and stakeholder theories, we analyze four types of stakeholders; donors, customers, employees and creditors. Results show that stakeholders are important in microfinance and that more non-profit organizations have donors on boards than for-profit organizations while customers and employees are found to be more represented on for-profit organizations. Regression results show that stakeholders through their resource provision role contribute both positively and negatively to financial and outreach results. Implications and areas for future research are further discussed.
Keywords
Microfinance institutions, Stakeholders, Boards