- Ninety percent of microfinance institutions have weak or non-existing corporate governance structures
- Corporate Governance ensures the correct management and administration of the entities and is key to creating transparency and trust for investors, as well as for attracting capital and accessing sources of funding.
- Financial performance and self-sustainability form one of the most relevant action principles for the activity and mission of MFIs.
- Transparency and customer protection is another of the pillars upon which good governance is built.
- The Universal Code has been made available to all MFIs interested in adopting it.
Today, the BBVA Microfinance Foundation (BBVAMF) presented the “Universal Code for Corporate Governance for Microfinance Institutions” prepared by the Foundation, and which establishes the principles and standards that all good governance codes for Microfinance Institutions (MFI) should contain, in accordance with internationally accepted standards and best practices.
Adopting a good governance code in an MFI makes the entity be perceived as more trustworthy and, therefore, grants it access to better financing conditions and better conditions on the capital markets in which it trades, as it is stronger and more competitive.
Of the general action principles proposed by the Code, one of the most noteworthy is financial performance and self-sustainability. MFIs must design microfinance activity in order to achieve financial self-sustainability in the shortest time possible, without overlooking the corporate purpose.
Together with that principle are the need for agility in processes, contractual transparency of the conditions under which customers purchase products, the adoption of internal and external control mechanisms, and control of risks, which is at the absolute core of microfinance activity.
Finally, the Code also presents the needs for institutions to establish objective indicators to rigorously measure and assess economic performance and social impact on the areas and populations that they cover.
During the public presentation of the Universal Code, which took place within the framework of the Second Microfinance Conference in Santa Marta, the President of the BBVA Microfinance Foundation, Manuel Méndez del Río, indicated that “the absence of good corporate governance is one of the most limiting factors faced by the microfinance sector to be able to serve the more than 250 million people who currently do not have access to the financial system in Latin America“.
“The challenge of increasing financial inclusion ranges from MFIs needing greater access to capital (debt and equity), the formalization of institutions, the search for transparency, efficiency and accountability, as well as their sustainability. To do so, one of the key factors, regardless of the nature of the institutions, is to establish a good corporate governance structure that helps improve the performance and scope of the microfinance sector”, stated Manuel Méndez del Río.
Complementary to this Universal Code, the Foundation also presented the “Guide to adopting good governance principles in microfinance institutions”, a practical tool written by experts in the field. This Guide covers the essential elements to be considered by the MFIs when preparing a corporate governance code and implementing it in their Boards of Directors.
In addition, to ensure its practical application, the Foundation will organize Corporate Governance Training Workshops for 400 senior managers of MFIs in eight Latin American countries to facilitate its comprehension and implementation.
“The BBVA Microfinance Foundation hopes to contribute to the transformation of the microfinance sector through these initiatives. To that end, both documents will be made available, free of charge, to all institutions who wish to implement them”, added the Foundation’s President.
The Corporate Governance System in BBVAMF
The BBVA Microfinance Foundation believes corporate governance is fundamental. Thus, its microfinance institutions have a Good Corporate Governance Code and a Code of Conduct in place. The Network’s Corporate Governance Code comprises a set of good practices, standards and principles that the Foundation deems desirable for the good governance of the Network and each member institution.
Furthermore, the Code of Conduct is a tool that is shared by the BBVA Microfinance Foundation and the members of the Network of Microfinance Institutions. The Code of Conduct is a source of value creation for all institutions and represents the MFIs’ explicit commitment to integrity and professional ethics. As a tool the Foundation offers the Network’s institutions, this Code provides a framework of reference for promoting and guaranteeing the behavior and conduct that each financial institution needs to maintain utmost honesty in its professional performance.