The World Microfinance Forum Geneva recently hosted a debate on issues related to corporate governance and its importance in managing crises in microfinance. Carlos Danel, Founder and Executive Vice-President of Compartamos, a microfinance institution (MFI) in Mexico, argued that certain general governance principles from the financial industry, such as having a majority of independent board members, can be applied to the microfinance industry. Sajeev Viswanathan, CEO of Bhartiya Samruddhi Finance Limited (BSFL), the microfinance arm of India’s Basix Group, disagreed, putting forth that the microfinance industry is too “diverse and fast-changing” for general principles.
There was no consensus on specific governance principles that should apply to all MFIs, but the panel did agree that nonprofit MFIs transitioning to for-profit status must work within governance structures that are specific to individual transformation stages. These governance structures should also, perhaps, differ by region. The panel also agreed that governance often affects investors’ decisions and is the primary determining factor in due diligence cases. As a follow-up to these debates, the World Microfinance Forum Geneva will launch an online “Governance Platform” in March 2011 that microfinance practitioners, investors and other stakeholders can endorse as well as contribute ideas to.
About Compartamos Banco: Compartamos Banco is a microfinance bank based in Mexico that was founded in 1990. It offers both group and individual loans in rural and urban areas. Compartamos Banco provides small loans to low-income Mexican individuals and business owners, such as craft manufacturers, food vendors and other small businesses. It also offers voluntary savings, insurance, and loans specifically for home improvement. The company made its initial public offering (IPO) in 2007 on the New York and Mexican stock exchanges in a transaction worth USD 467 million, and, as of June 30, 2010, has a total loan portfolio of MXN 8.5 billion (the equivalent of USD 673 million).
About Bhartiya Samruddhi Finance Ltd. (BSFL): Bhartiya Samruddhi Finance Ltd. (BSFL) is a regulated non-banking finance company (NBFC) based in Hyderabad, India, that was founded in 1997. It is part of the BASIX Group, which provides financial services, agricultural/business development services and institutional development services to rural poor households. According to the Microfinance Information Exchange (MIX), BSFL reported a gross loan portfolio of USD 223.2 million, total assets of USD 302.6 million and 1.1 million active borrowers as of March 31, 2010.
By Christopher Maggio, Research Associate
[1] World Microfinance Forum Geneva press release: “The Future Risks and Opportunities in Investible Microfinance: Debate on Corporate Governance in Microfinance, 14th October, Geneva”: http://www.microfinancegateway.org/gm/document-1.9.48410/World_Microfinance_Forum.pdf
MicroCapital’s Microfinance Universe profile: Compartamos Banco: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Compartamos+Banco
MicroCapital Universe: Bhartiya Samruddhi Finance Ltd: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bhartiya+Samruddhi+Finance+Ltd+(BSFL)
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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