Effect of Corporate Governance on Performance of Microfinance Institutions: A Case from Pakistan

ABSTRACT

We aim to assess the effect of corporate governance on the financial, economic, and social performance of microfinance institutions (MFIs) in Pakistan. The sample comprises twenty-five MFIs and covers their performance over five years, 2005–09. The results of the study indicate that governance variables do have an influence on the performance (economic and social) and productivity of the MFIs in Pakistan. Larger boards inversely affect the economic performance but have a positive effect on outreach and productivity. Presence of female directors does not play any role in improving economic performance but positively affects outreach. Duality of chair with CEO is a negative contributor to performance, outreach, and productivity. Firm size, experience, regulation of MFIs, and nonprofit activities in lending have positive effects on performance outreach and productivity.

KEY WORDS:

• corporate governance
• financial performance
• microfinance institutions
• Pakistan
• social performance