Transforming NGO MFIs : critical ownership issues to consider

Abstract

In most cases of transformation, nongovernmental organization (NGO) microfinance institutions (MFIs) have two primary objectives: (i) to provide clients with a range of financial services beyond credit, including savings and transfer services; and (ii) to increase access to capital, whether through commercial borrowings, deposits, raising equity, or all three. This paper provides insights and guidance for those who plan to carry out a transformation. Thus the paper's discussion of issues is likely more detailed and technical than most general readers will care to wade through. At the same time, this is not a how to manual nor does it identify right and wrong answers. Such an approach will not be feasible, primarily because of the different scenarios transforming institutions will face depending on local law and regulation. Although this paper touches on matters that have raised difficult ethical and double bottom line issues in recent transformations and post-transformation sales of shares, it does not deal with these issues in depth because they have already been discussed in various publications.