Board committees and performance in microfinance institutions

Muluneh Hideto Dato (Solvay Brussels School of Economics and Management, CEB, and CERMi, Universite Libre de Bruxelles, Brussels, Belgium) (School of Business and Law, Universitetet i Agder Okonomi og samfunnsvitenskap, Kristiansand, Norway)
Roy Mersland (Economics and Social Sciences, University of Agder, Kristiansand, Norway)
Neema Mori (University of Dar es Salaam Business School, Dar es Salaam, Tanzania) (University of Agder, Kristiansand, Norway)

International Journal of Emerging Markets

ISSN: 1746-8809

Publication date: 16 April 2018



The purpose of this paper is to empirically relate subordinate board structures with improved financial and social performance in microfinance institutions (MFIs).


The research question is analyzed using a panel data from 23 MFIs in Ethiopia over a period of 2006-2011. Random effects panel data estimation is applied to analyze the link between board committees and MFI’s performance.


In MFIs with larger than average boards, the findings demonstrate significant ties between financial and outreach performance and how their boards are structured. The structure of board committees moderates the relation between board size and financial and outreach performance measures. Importantly, board committee benefits MFIs through better operational self-sufficiency, lower operating expenses, greater outreach to customers, and outreach to poorer customers using average loan size as the proxy.

Practical implications

Practitioners within microfinance sector, and those operating in advisory and regulatory roles to the sector could benefit from the argument advanced in the paper in that normative recommendation to restructure boards or establish committees requires reevaluating the board characteristics vis-à-vis the optimal monitoring, controlling, and advising needs of the institution.


Prior literature focuses on who sits on boards, how large are the boards, and how independent are they. This paper advances the understanding of the structure of board committees and how this may affect the performance of MFI. This approach provides better representation of director’s role and is thereby a good test of board effectiveness.



Dato, M., Mersland, R. and Mori, N. (2018), "Board committees and performance in microfinance institutions", International Journal of Emerging Markets, Vol. 13 No. 2, pp. 350-370.

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