Governance guide for micro lenders launched

The International Finance Corporation (IFC) has launched a handbook aiming to improve governance and risk-management practices in microfinance institutions (MFI) in Myanmar.

The IFC, a member of the World Bank Group, developed the resource guide – Implementing Corporate Governance Practices: A Resource Guide for Microfinance Institutions in Myanmar – as many MFIs lack the resources to develop good corporate governance practices, said Ashani Alles, IFC’s acting country manager for Myanmar, during the launch of the handbook on Thursday.

“This IFC guide will help MFIs in Myanmar take concrete steps to improve their corporate governance framework, thereby inspiring investor confidence and increasing access to capital,” Alles said.

While the number of MFIs in the country has been rising, and they are estimated to have some 5.5 million clients across Myanmar today, the nascent industry still requires the strengthening of corporate governance, which would provide structures and processes governing the relationship between different stakeholders and make the companies more accountable to shareholders.

Many MFIs in Myanmar today still suffer from problems like the lack of a board, insufficient training for staff, informal company structures, and opaque disclosure, largely due to the fact that many of these financing firms are controlled by a small group of shareholders, often comprising family members.

“The IFC’s handbook is timely and will help MFIs increase their ability to adopt responsible and sustainable financing practices, unlocking the potential of the rural sector and small enterprises,” said U Minn Aung, chair of the Myanmar Microfinance Association (MMFA), in a statement.

A recent IFC study reveals that the top-performing companies in terms of corporate governance have up to three times return on equity compared with the bottom ones.

Myanmar has 189 licensed MFIs, including 112 local, 53 foreign, and 15 non-governmental organizations, listed under the Financial Regulatory Department, as of October this year.

“This resource guide is the first step … for MFIs to self-assess themselves and benchmark their practices against what we recommend,” said Anar Aliyev, IFC’s corporate governance officer.

“In the near future, the IFC will also be working with the MMFA, to bring more awareness-raising activities as well as providing support and training to regulators,” he added.

The Organisation for Economic Cooperation and Development lists some basic principles of corporate governance, including fairness that ensures equitable treatment of all shareholders, minority and foreign ones included; recognizing the law-endowed rights of stakeholders as responsibility; transparency that guarantees timely and accurate disclosure of necessary information; and accountability that holds the management of the company accountable.

Source: Myanmar Times

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