Ownership structures, corporate governance and performance of Micro Finance Institutions (MFIS) in Uganda

Abstract

The purpose of the study was to examine the relationship between ownership structures, corporate governance and the performance of small MFIs in Uganda. Interest in this study was as a result of poor performance of these MFIs as indicated in the AMFIU Annual report of 2006. The study therefore sought to determine if this could be attributed to their ownership structures and therefore governance levels.

A cross sectional survey design was used to undertake this study using a sample of 69 MFIs from which responses from 44 MFIs were received; giving a response rate of 67.7%.

Findings of the study reveal that ownership structures and corporate governance are significant predictors of MFI performance accounting for 42.4% of the variance.

The study thus recommends that the MFIs should improve their ownership structures by increasing the number of legal persons as shareholders, reducing on the ownership concentration and clearly defining the limits of owners as far as management is concerned; because these have a positive impact on the corporate governance levels of the firm and therefore their performance. There must be total independence of the BOD so that the systems of the MFIs can be streamlined.