Performance and trade-offs in microfinance organizations - does ownership matter?

Mersland, Roy and Strøm, Reidar Øystein (2007): Performance and trade-offs in microfinance organizations - does ownership matter?

Abstract

Policy advocates argue the case for the transformation of non-government Microfinance Organizations (MFOs) into shareholder owned firms. The argument is that this will bring about superior performance. This paper investigates whether the superiority of shareholder owned MFOs is empirically supported. The findings indicate that the difference between shareholder owned MFOs and non-government MFOs is minimal. Our results contradict established paradigms and policy guidelines in the industry. However, the results are not necessarily surprising since ownership theories do not predict a clear preference for one type of ownership in the microfinance market. Furthermore, findings in general banking markets as well as the pro-poor banking history indicate that mutual and non-profit ownership can compete successfully with investor ownership.

• Item Type: MPRA Paper
• Institution: Agder University College and Østfold University College
• Language: English
• Keywords: Microfinance; outreach; performance; trade-offs; transformation; ownership; corporate governance
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages; O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance