Transforming NGO MFIs: Critical Ownership Issues to Consider

This paper guides NGO-MFIs that want to transform into for-profit companies on resulting ownership-related issues. The paper states that:

• NGO-MFIs that transform into for-profit companies are permitted to offer additional services, access commercial capital, and work towards better governance;
• Transformation often brings with it outside owners, who may bring financial expertise and important connections;
• Risks associated with transformation include the possibility of mission drift;
• Advantages and disadvantages are largely determined by the selection of outside owners and their involvement in the governance of the institution;
• It is crucial for the NGO-MFI to familiarize itself with legal and financial considerations that may affect selection of outside investors;
• Potential investors also want to familiarize themselves with limits they will be subject to before entering into negotiations.

Finally, the paper emphasizes the need for careful investigation of ownership issues in the specific context of each transformation in order to ensure smoother, quicker, less expensive and more effective transactions.