Corporate Governance of the Deposit Taking Microfinance Institutions (MFIs) in Ethiopia (Presentation)

This study examines regulatory features affecting MFI governance in Ethiopia. It assesses the performance of the board of directors and executive management of MFIs, and studies the outcomes and challenges of MFI governance in Ethiopia. Good governance in deposit-taking MFIs helps them increase outreach, and improve transparency, accountability, sustainability and profitability. However, shareholders, regulators and boards members have not given due attention to governance issues. Evaluation of corporate governance of Ethiopian MFIs reveals that:

• Prudential regulation and supervision has promoted effective governance, improved performance and encouraged them to increase their commitment to sustainability;
• Performance and effectiveness of the board of directors varies; however, most MFIs place enormous power in the CEO's hands;
• MFIs face challenges such as lack of clarity in ownership and mission, inactive boards, lack of performance indicators and poor documentation.

Effective governance requires effective prudential regulation, developed systems and procedures, and empowered boards and management. Regulators and shareholders should address MFI governance issues by revising the regulatory framework and developing an industry-wide code of governance for MFIs