MICROFINANCE PUBLICATION ROUND-UP: Effects of Female Leadership on Microfinance Institutions (MFIs); Impact of Microcredit in Morocco; Social Performance Management Guide

Female Leadership, Performance, and Governance in Microfinance Institutions;” by Reidar Øystein Strøm, Bert D’Espallier and Roy Mersland; published by Elsevier; 2014; 16 pages; available for purchase at http://www.sciencedirect.com/science/article/pii/S0378426614000284

This report examines the relationship between the performance of microfinance institutions (MFIs) and whether women occupy high management positions, including CEO, chair or director, in those MFIs. Based on data from rating agencies on 329 MFIs in 73 countries collected from 1998 to 2008, the authors make three main conclusions. The first is that women are more likely to be leading MFIs that seek to provide financial services predominantly to women and less likely to be heading MFIs with “international founder[s],” or affiliated with organizations based in developed countries. The second conclusion is that female leadership is correlated with weaker corporate governance, the rules and processes by which an institution is controlled. The authors make this conclusion based on several criteria, including the fact that MFIs with women in high management roles have fewer board meetings and less frequent internal audits. Despite this, the authors conclude that female-led MFIs are more likely to experience better financial performance than MFIs without women in high management positions [1].

“Estimating the Impact of Microcredit on Those Who Take It Up: Evidence from a Randomized Experiment in Morocco;” by Bruno Crépon, Florencia Devoto, Esther Duflo and William Pariente; published by the Massachusetts Institute of Technology; May 2014; 53 pages; available at http://economics.mit.edu/files/6659

For this report, the authors studied the results of a microcredit program offered by Al Amana, a Moroccan MFI, which was created in 2006. Villages within the study are split into two categories: treatment villages, in which 13 percent of households received a microloan, and control villages, in which no loans were provided. The main conclusion is that, among households that were identified as being more likely to borrow prior to receiving a loan, microcredit led to increased profit through higher investment in “self-employment activities,” which were mainly agricultural. The authors identify two main reasons that relatively few people seek loans as a way to increase self-employment: (1) there is significantly more stress associated with self-employment than with other types of employment; and (2) microenterprise investments are risky because they have a very broad range of profitability. In addition, the authors conclude that increased investment in self-employment as a result of microloans was correlated with decreased casual labor, which led to no difference in measured income or household consumption despite the higher profits experienced by those who invested in self-employment [2].

“The Universal Standards for Social Performance Management Implementation Guide,” by Leah Wardle; published by Social Performance Task Force; 212 pages; available at http://www.ada-microfinance.org/en/news/blog/detail-news/2014/06/the-updated-universal-standards-guide-has-arrived?utm_source=mailing&utm_medium=mail&utm_campaign=20140710&utm_content=The+updated+Universal+Standards+Guide+has+arrived 

This guide outlines six “universal standards” for social performance management and describes mechanisms for ensuring their implementation in a financial institution. The standards pertain to the definition of social goals, financial practices, product development and marketing, employment, management of staff, and client interaction. The guide begins with a five-step plan for how best to use the standards: (1) introduce the standards to upper management; (2) assemble a social performance management team; (3) assess the financial institution’s current practices; (4) make an action plan for change; and (5) regularly review progress towards achieving the standards. The guide continues with an explanation of how to identify specific aspects of an institution to attempt to improve upon and which management positions are best suited to implement the changes. Common goals involve increasing “sustainable business practices,” maintaining standards of client protection and achieving employee satisfaction. Among the suggested “dimensions” of implementation are the definition and measurement of social goals, the responsible treatment of clients and employees, balancing social and financial performance, and designing products that meet client needs. Finally, the guide offers resources to assist institutions with educating management and line employees about the standards.

By Benjamin Krupp, Research Associate

Sources and Additional Resources

[1] Elsevier: Female Leadership, Performance, and Governance in Microfinance Institution

[2] Massachusetts Institute of Technology: Estimating the Impact of Microcredit on Those Who Take It Up: Evidence from a Randomized Experiment in Morocco

[3] Social Performance Task Force: The Universal Standards for Social Performance Management Implementation Guide

MicroCapital, July 16, 2014: International Finance Corporation (IFC) to Assist Central Bank of Morocco with Credit Information Sharing Regulations

MicroCapital, November 14, 2013: Women Microfinance Client Often Save More, Are More Loyal to Lenders

MicroCapital, April 2, 2013: Social Performance Task Force (SPTF) Calls for Survey Submissions by April 5, 2013

MicroCapital, July 22, 2011: Social Performance Task Force (SPTF) Releases Proposes “Universal Standards for Social Performance” in Microfinance

MicroCapital Universe Profile: Social Performance Task Force

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

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