Governance and Promoting the Social Mission

A survey of “Governance Practices among Microfinance Institutions in India” undertaken by MicroSave and SIDBI with support from UKAID and released in June documents the overall strengthening in governance that has taken place in the sector in recent years in response to the 2010-12 crisis, enhanced regulation, and intensifying competition. The survey notes the progress made in building board and committee capacity, formalizing procedures and oversight of management and implementing the basic elements of client protection. However, the Indian MFIs have not made as much progress in meaningfully engaging the Board in oversight and promotion of the social mission. Few Boards monitor social performance data, consider social objectives in evaluating management performance, or even brief Directors on social goals. Several Indian MFIs do offer examples of how social mission can be incorporated into the structure of the MFI in creative ways; what Grassroots has termed “hardwiring”. In Grassroots’ view, the performance of the Indian MFIs with respect to overall governance is as good as or better than those in other regions, but poses similar challenges with respect to improving social performance.  Grassroots’ Impact First Initiative aims to support MFIs in improving social performance through operational targets, better metrics and engaged, informed governance.