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Guidance and evaluation

Handbook for the analysis of the governance of microfinance institutions

How to evaluate the governance of micro-finance institutions

Authors: C. Lapenu; D. Pierret; Comité d’échanges, de réflexion et d’information sur les systèmes d’épargne-crédit (CERISE); Institut de recherches et d’applications des méthodes de développement (IRAM); Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ)
Publisher: International Fund for Agricultural Development , 2008

Full text of document

Microfinance is going through a critical phase. While it has proved capable, through a variety of approaches, of providing financial services to populations excluded from the traditional banking sector, most microfinance institutions (MFIs) face the challenge of institutionalisation and achieving sustainability.

This guide addresses the evaluation of the governance of microfinance institutions using an approach from the point of view of “stakeholder analysis”. It is written for those interested in working on the governance of a microfinance institution such as elected officials, directors or donors.

The approach used is based on the following principles:

  • Governance can take on many forms and there is no “best practice” approach.
  • The inherent crises of microfinance institutions should not be ignored but rather analyzed to understand the institution better and thus judge whether or not the form of governance is appropriate.
  • It is possible to analyze all types of microfinance institutions without necessarily ignoring the specificities of different institutional forms.
The guide distinguishes between several types of institutions: cooperatives, non-profit organizations, private companies and public institutions and examines themes that are relevant to all these institutions as a whole but also individually. A broad answer is given for each question followed by specific cases.

The two modules outlined provide:
  • a diagnostic tool for evaluating the governance of a microfinance institution including stakeholder analysis; decision-making processes and crisis/problem management
  • a guide for reflection on the strategic choices and governance challenges microfinance organisations face.
The modules are complementary, organized around five themes (Mission/Vision; Financing; Institutional Type; Stakeholders; Organization) to enable the reader to choose an area of interest and pass from one module to the other.

[adapted from author]