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> Posted by Deborah Drake and Andrea Horak, Vice President/Program Manager and Program Coordinator, Investing in Inclusive Finance, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
With good governance a top priority for investors, donors, and regulators, it’s time to ask exactly what good governance looks like. A recent debate about the Anglo-American (shareholder) versus the European (stakeholder) models of governance set out to answer that question. The Governance Working Group (GWG), a 25-member group of microfinance professionals focused on governance, hosted by CFI, sponsored a webinar to discuss the characteristics of the two models and their implications for microfinance institutions, equity funds, and clients.
Lauren Burnhill of One Planet Ventures started off the debate by describing the model of single tier governance commonly used in the U.K. and U.S. In this model, each company has a single board that includes both executive directors, who are employed by the company or have significant ties to its corporate management, and non-executive directors who have no direct relationship with the company or its management. The company CEO may serve as chair of the corporate board, in which case a great deal of power is invested in that board position. The overarching duty of the board is to protect the interests of shareholders. In this model, particular importance is given to the protection of minority shareholder rights.
>Posted by Stephanie Geake
There are a number of valuable governance initiatives going on in our sector. We count five at the practitioner level, four at the investor level and four more led by policy-makers. While these projects are coming out with interesting new insights and a range of practical tools that could be of use to other actors, they have limited dissemination channels for reaching those for whom their work is intended.
Enter the Governance Working Group (GWG), created by the World Microfinance Forum in Geneva in 2010 and housed within the Center for Financial Inclusion at Accion since April 2012, with CGAP as an active partner. The group is made up of experts in microfinance governance, many of whom are leading the initiatives mentioned above. They cover governance projects spanning a number of geographies, topics and players: one initiative is developing a governance rating methodology in a pilot project in Central America; another has produced a publication on current Board composition and structures across MFIs in several regions, yet another sub-group is testing peer-to-peer learning workshops in the field, where CEOs and Board Chairs share governance experiences amongst each other. Read the rest of this entry »
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