Microfinance institutions' risk and governance in Sub-Saharan Africa
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 17 December 2021
Issue publication date: 21 February 2022
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.
Keywords
Acknowledgements
This paper has benefited from the constructive comments received at seminar presentations at the Department of Accountancy and Finance, University of Otago and the 7th Financial Markets and Corporate Governance 2016 Conference (Melbourne). The authors also thank Marianne Lown for the editorial assistance.
Declarations of interest: None
This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Citation
Tadele, H., Roberts, H. and Whiting, R. (2022), "Microfinance institutions' risk and governance in Sub-Saharan Africa", International Journal of Social Economics, Vol. 49 No. 3, pp. 449-469. https://doi.org/10.1108/IJSE-10-2020-0719
Publisher
:Emerald Publishing Limited
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