The influence of leadership expertise and experience on organizational performance: a study of Amanah Ikhtiar Malaysia

Abstract

This research examines the top leadership performance on a replication of the Grameen Bank Approach in Malaysia. The objective is to identify whether there is a relationship between the leadership's expertise and experience on the organization's performance in achieving the organization's mission. It is noted that change of leadership resulted in unstable efficiencies in the microfinance organization. Leadership with expertise and experience achieved positive organizational outcome, as measured through indicators such as outreach and operating efficiency. The limitations of the research and areas for further investigation are presented.

Keywords:

• expertise
• leadership
• Malaysia
• microfinance
• performance
• sustainability

Acknowledgements

Comments and suggestions received from seven anonymous reviewers are gratefully acknowledged.

Notes

1. Microfinance refers to the provision of financial services such as loans, savings, insurance, transfer services and other financial products to poor or low income clients.

2. The Grameen Bank has a group-based credit approach which utilizes the peer-pressure within the group to ensure the borrowers follow credit discipline. It provides credit to the poorest of the poor in rural Bangladesh, without requiring collateral (http://www.grameen-info.org/). The system of Grameen Bank is based on the idea that the poor have skills that are under-utilized. It has served more than seven million borrowers. Grameen Bank and its founder, Professor Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006.

3. Projek Ikhtiar was an action research project by the Centre of Policy and Research of Universiti Sains Malaysia. It provided small loans on reasonable terms to members of poor rural households to finance income-generating activities, and the targets were households living below two-thirds of the government's poverty line. The loans are taken to the poor in their village, disbursed in a staggered manner during the weekly public meeting. An adult from the eligible households who qualify for membership would borrow as a member of a five-person group, but use the loan individually. The beneficiaries of AIM are the borrowers, also referred to as Sahabat. They continue to be very poor households, regardless of race, religion and political belief.

4. The Grameen Bank approach is a reversal of the standard banking practices which operates on a system of trust, responsibility, involvement and resourcefulness and does not demand collateral from its clients. There are five principles for the loan in Malaysia: no collateral, no guarantor, no legal action taken to collect repayment, no interest, and any remaining loan of good members will be written off should they die (Gibbons and Kasim 1990).

5. The revolving fund amounting to RM200 million was frozen following an investigation by Bank Negara, the Central Bank.