Paper
With Transformation to Regulated MFI, What are the Models of Ownership that Protect Social Mission?
Key issues in transforming a not-for-profit institution into a regulated MFI in the Philippines
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This paper was commissioned by the Microcredit Summit Campaign in 2006. The paper identifies the key areas that a microfinance institution (MFI) needs to consider in order to protect its social mission as it transforms into a regulated institution. They are as follows:
- Knowing the right reason and understanding the mission. The paper states that:
- The organizational changes that transformation would require should support the organization's social mission;
- MFIs should enter the transformation process only because of - its practicality in expanding operations, its usefulness in generating resources and to complement its growing operations.
- Knowing the ropes and expanding expertise. The paper addresses:
- the challenge of equipping the board of trustees and the paradigm shift that needs to take place in the mind-set of the stakeholders on the transition that the organization will be going through from non-profit to for-profit organization, from unregulated to regulated operations.
- Knowing the fit and strengthening the structure. The paper deals with the structure within which the organization operates and states that:
- In the process of transformation, the original board of trustees should remain in control;
- The majority of directors of the new organization should come from the parent organization in order to protect its social mission, culture and discipline;
- The board of directors should be taught the skills that they need to govern a regulated financial institution.
The paper concludes that social mission has to be balanced with the goal of viability to help the poor become self-sufficient and self-reliant.
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