Are NGOs and cooperatives similar or different? A global survey using microfinance data

Abstract

Corporate governance remains fundamental to ensuring the social mission alongside the financial sustainability of microfinance institutions. One primary governance issue relates to the legal form used to perform microfinance activities. The sector deploys various forms including Banks, Non-Bank Financial Institutions, Cooperatives and NGOs, but each of them has unique features that lead to different orders of priorities and to distinct structures and mechanisms to pursue such a dual objective. This study compares the board governance model and the performance of cooperative organizations (COOPs) with nongovernmental organizations (NGOs) involved in microfinance. Using data on 352 rated microfinance institutions, the test results show that, compared to NGOs, COOPs have larger boards and a higher number of board meetings. However, NGOs have a greater percentage of international board members. The test on performance reveals that, whereas COOPs are more cost-efficient and charge lower interest rates, NGOs generally perform better in terms of social performance. However, the two organizational types do not perform differently in terms of profitability.