A survey of the corporate governance practices among microfinance institutions in Kenya
Nganga, John N
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The objective of the study was to determine corporate governance principles and practices among Micro Finance Institutions (MFls) in Nairobi. The study hoped to benefit the Board of Directors of MFls in evaluating the way their organizations are governed and in identifying areas where corrective action may be necessary. The study used a descriptive survey. The population of the study comprised of all the Micro finance institutions registered in Kenya. A sample size of thirty seven MFIs in Nairobi was selected and studied. The study found out that the board formulated long term strategy of the organization to a great extent, however the board did not at all consult technocrats on professional matters and if it did, it was to a little extent. The study also found out that factors such as organization culture, efficiency and effectiveness of service delivery and community need and other stakeholders' interest attributed to corporate governance practices in the organization to a great extent. Moreover, there was no succession plan in place for the board's chairperson, board members, the CEO and the senior management in majority of the MFIs and even the board performance was not evaluated regularly. The researcher concludes that Directors were rarely provided with detailed Terms of Reference and even new board members were rarely given clear information on the role of management and that of the board and the relationship between the two. The Supervisory Board should ensure 'that the right management is in place, pursuing the right strategy. The current inadequacies in understanding their roles and responsibilities means many directors are not fulfilling these duties. MFls should create fully functioning supervisory boards. They should clarify the role and responsibilities of the Supervisory Board and ensure these are documented appropriately. Regular meetings are also required in order to be able to commit sufficient time to these duties. MFls need to improve their corporate governance if they wish to attract external funding, and especially if they wish to transform into major financial institutions.