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Article
Publication date: 16 April 2018

Muluneh Hideto Dato, Roy Mersland and Neema Mori

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

International Journal of Emerging Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 5 February 2021

Naome Otiti, Kjetil Andersson and Roy Mersland

The purpose of this study is to determine whether there exists employee-client matching at the bottom of the pyramid (BOP) and the most favourable employee-client…

Abstract

Purpose

The purpose of this study is to determine whether there exists employee-client matching at the bottom of the pyramid (BOP) and the most favourable employee-client categorization in terms of employee productivity when serving the BOP market. This is important in a bid to determine how to effectively operate at the BOP given the market’s unique characteristics.

Design/methodology/approach

This study uses two methods depending on the research question. First, a one-way analysis of variance (ANOVA) is used to determine the different employee-client categories based on socio-economic status. Second, fixed effects analyses are performed based on these categories to determine the most suitable employee-client category.

Findings

The results show the existence of employee-client matching based on similar socio-economic status. However, multivariate testing reveals that the mismatch category, where employees are of higher socioeconomic status than the clients, generates more favourable employee productivity. Moreover, this result may be contingent on the geographical location of the firm.

Practical implications

The findings are important for human resource management particularly the employment strategy of BOP firms. It suggests the need to consider employee profiles and client profiles when deciding which new markets to target.

Originality/value

The paper uses a global database of microfinance institutions as a case of BOP firms to investigate employee-client matching at the bottom of the pyramid.

Details

International Journal of Development Issues, vol. 20 no. 1
Type: Research Article
ISSN: 1446-8956

Keywords

Article
Publication date: 16 April 2018

Leif Atle Beisland, Roy Mersland and Øystein Strøm

This study is motivated by recent research suggesting that the funding benefits of using Big Four auditors may not be as uniform as were previously assumed. The purpose of…

Abstract

Purpose

This study is motivated by recent research suggesting that the funding benefits of using Big Four auditors may not be as uniform as were previously assumed. The purpose of this paper is to analyze the relationship between use of Big Four auditors and access to debt capital by applying data from microfinance institutions (MFIs) in emerging countries, a population typically not investigated in accounting research.

Design/methodology/approach

The authors apply a unique hand-collected data set from 60 emerging markets and empirically investigate whether access to various debt categories is related to the use of Big Four auditors.

Findings

The authors find that access to international commercial debt, international subsidized debt and government agency debt is positively related to the use of a Big Four auditor. For local commercial debt, the authors find no association between auditor type and access to debt capital. The association between auditor choice and access to debt capital is stronger for nonprofit than for-profit MFIs.

Originality/value

This is the first audit quality study to include a broad sample of emerging countries, which in itself is an important contribution. As far as general audit quality research is concerned, the authors take the literature one step further by showing that the benefits of using a Big Four auditor may be dependent on the specific source of debt financing a firm or organization seeks to use. Moreover, the authors demonstrate that the for-profit vs nonprofit dimension influences the relationship between auditor choice and access to capital.

Details

International Journal of Emerging Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 17 December 2021

Haileslasie Tadele, Helen Roberts and Rosalind Whiting

The purpose of this study is to explore the impact of MFI-level governance on microfinance institutions' (MFIs’) risk in Sub-Saharan Africa (SSA).

Abstract

Purpose

The purpose of this study is to explore the impact of MFI-level governance on microfinance institutions' (MFIs’) risk in Sub-Saharan Africa (SSA).

Design/methodology/approach

The study uses data from a sample of 151 MFIs operating in 21 SSA countries during 2005–2014. The Feasible Generalized Least Squares (FGLS) regression model is applied to investigate the relationship between MFI level governance mechanisms and risk.

Findings

The study provides new evidence that board characteristics have differential effects on for-profit (FP) and not-for-profit (NFP) MFI risk. Board independence reduces credit risk of NFP MFIs. Foreign director presence increases MFI failure risk. Furthermore, greater female director representation reduces (increases) FP (NFP) financial risk whereas female CEOs are associated with higher (lower) FP (NFP) financial risk.

Originality/value

The paper contributes to existing literature on microfinance governance and risk, by exploring the impact of governance on MFI risk based on MFIs profit orientation. In addition, the study uses three different risk measures unlike previous microfinance studies.

Details

International Journal of Social Economics, vol. 49 no. 3
Type: Research Article
ISSN: 0306-8293

Keywords

Book part
Publication date: 1 January 2008

Roy Mersland and R. Øystein Strøm

Microfinance – the provision of financial services to the poor – is high on the public agenda. We discuss and evaluate three myths regarding microfinance based on new data…

Abstract

Microfinance – the provision of financial services to the poor – is high on the public agenda. We discuss and evaluate three myths regarding microfinance based on new data from rated microfinance institutions (MFIs). The first myth is that an efficient MFI needs to be shareholder owned; second that its governance should first and foremost address the potential conflict between owners and managers; and third that MFIs are drifting away from their poorer customers towards serving the wealthier. The data do not support any of these myths. We conclude that microfinance is a viable business model.

Details

New Perspectives in International Business Research
Type: Book
ISBN: 978-1-84855-279-1

Content available
Book part
Publication date: 1 January 2008

Abstract

Details

New Perspectives in International Business Research
Type: Book
ISBN: 978-1-84855-279-1

Book part
Publication date: 1 January 2008

Maryann Feldman and Grazia D. Santangelo

This volume is the outcome of the 33rd European International Business Academy (EIBA) conference held at the Faculty of Political Science of the University of Catania…

Abstract

This volume is the outcome of the 33rd European International Business Academy (EIBA) conference held at the Faculty of Political Science of the University of Catania (Italy). This conference brought together more than 300 scholars from around the world to discuss theoretical and empirical issues in international business (IB), as well as their consequences and challenges to IB scholars and policy-makers. Organized around 10 thematic tracks, the conference is the annual forum for discussing major research issues in the IB realm. This volume is a collection of the best papers, which, selected through a blind refereeing process for presentation at the conference, make significant contributions by providing fresh new perspectives on a variety of relevant topics.

Details

New Perspectives in International Business Research
Type: Book
ISBN: 978-1-84855-279-1

Article
Publication date: 7 August 2018

Prasenjit Roy and Ambika Prasad Pati

The purpose of the paper is to confirm the adherence of double bottom line objectives by the microfinance institutions (MFIs) of India and, further, to identify the causal…

Abstract

Purpose

The purpose of the paper is to confirm the adherence of double bottom line objectives by the microfinance institutions (MFIs) of India and, further, to identify the causal factors that work out their double bottom line commitments.

Design/methodology/approach

The study uses an empirical data set for the period of 10 years, i.e. from 2005–2006 to 2014–2015, gathered from www.mixmarket.org. It follows an exploratory approach with overall and segmented performance analysis. Further, a panel data regression model is applied to identify the causal factors of double bottom line.

Findings

The study finds that MFIs are adhering to the notion of double bottom line. The segregated analysis does not give any solid indications of trade-off. The mature and small MFIs are found to be better in attaining social objective but the new and large are better in sustainability. The non-governmental organization (NGO) category is more committed to the double bottom line than the non-NGO. The causal analysis could not show any relationship between financial performance and outreach. Though age and outreach size show relationships with small loan sizes, they do not influence sustainability. The operating and financial expenses along with portfolio quality are found to be the main causal variables of sustainability.

Practical implications

There are indications for the policy makers to frame regulations and prepare a roadmap for the mature and the large MFIs. This would help them adhere to the double bottom line, which would further streamline the operations of the MFIs in the long run. Containing operating expenses and controlling the asset quality still remain to be the challenges which need to be addressed with proper policy guidelines.

Originality/value

The analysis of the study focuses on industry classifications, which make it more intriguing in nature given the fact of the varied features like age, legal status and outreach. India being the largest microfinance market in the world has limited studies. Most of the studies in double bottom line are based on a cross-country analysis, which generalizes the individual characteristics. The study fills this gap and adds to the understanding of the double bottom line commitments in the Indian context.

Details

International Journal of Social Economics, vol. 46 no. 1
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 25 August 2021

Siti Nazariah Abdul Zalim

The purpose of this paper is to examine the influence of financial performance measures on the social norms and values of an Islamic microfinance institution (IMFI), and…

Abstract

Purpose

The purpose of this paper is to examine the influence of financial performance measures on the social norms and values of an Islamic microfinance institution (IMFI), and the actions taken by the organisational members to maintain these values in their organisation.

Design/methodology/approach

A qualitative case study of an NGO-based IMFI in Malaysia was undertaken, with interviews conducted with officers and managers at various organisational levels of the IMFI. Insights gained from institutional work and institutional logic were used to theorise the findings.

Findings

The IMFI used mainly financial measures to manage its performance, which were interlinked with the commercialisation approach in the industry, and the top management’s focus on the financial sustainability of the organisation. The lack of social goals and the use of reward-based financial measures did not weaken the solidified social values at the operational level, due to the independence of the operational units, the compartmentalisation of profit-making activities and the institutional work of the operational managers. The operational managers acted as carriers of this social logic. Religious values formed the pillar of the permanence of social values in the IMFI.

Originality/value

This study provides insights into the internal practices of IMFIs, and the role of religious values in the permanence of social logic in the context of an NGO-based IMFI. The lack of measurable social goals, as well as their rewards, does not compromise the focus on poverty alleviation and community development in view of the intrinsic rewards and accountability of the operational managers.

Details

Qualitative Research in Financial Markets, vol. 14 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 9 March 2021

Amit Kumar Bardhan, Barnali Nag, Chandra Sekhar Mishra and Pradeep Kumar Tarei

An amalgamation of Decision-Making Trial and Evaluation Laboratory (DEMATEL) and Analytical Network Process (ANP) has been performed to develop a decision-making framework…

Abstract

Purpose

An amalgamation of Decision-Making Trial and Evaluation Laboratory (DEMATEL) and Analytical Network Process (ANP) has been performed to develop a decision-making framework for improving the overall performance of the microfinance institutions. A primary survey was conducted to collect real-time data from the heterogeneous stakeholders of microfinance institutions across India. The validation of the proposed framework is performed by comparing the results against the conventional method of Analytical Hierarchy Process (AHP).

Design/methodology/approach

This study identifies various dimensions and indicators for measuring the performance of Indian microfinance institutions. Additionally, the ranking and prioritisation of the performance dimensions and indicators is obtained by considering the mutual interrelation between them.

Findings

The study indicates that there exists a significant dyadic relationship between financial performance and social performance for improving the overall performance of the microfinance institutions. Governance is found to unidirectionally influence both financial and social performance. Among all the considered dimensions, financial performance of a microfinance institution is the most critical dimension for improving the overall performance. The top five performance indicators of the Indian microfinance institutions are funding source, borrowing and overhead cost, size of the firm, end-use of the money and depth of outreach.

Research limitations/implications

The study was conducted in the context of Indian microfinance institutions; hence the scope of generalisation of the results is limited. This research considers both subjective and objective aspect of the performance dimensions and indicators from the perspective of multiple stakeholders (i.e. firm, society and regulator). The integrated framework is expected to aid in improving overall performance of microfinance institutions by focusing on the most critical (high prioritised) performance indicators.

Originality/value

An integrated DEMATEL-ANP framework is used in the domain of microfinance to assess the performance dimensions. This study is unique in terms of analysing performance of microfinance institutions from the perspective of heterogeneous stakeholders.

Details

Benchmarking: An International Journal, vol. 28 no. 9
Type: Research Article
ISSN: 1463-5771

Keywords

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