CORPORATE GOVERNANCE IN MICROFINANCE ENTERPRISES: A CONDITIONAL MATRIX STUDY FROM SPAIN TO LATIN AMERICA

Abstract

ABSTRACT Microfinance institutions are defined as organizations that provide banking services for financially disadvantaged people, who do not have the opportunity to utilize the traditional financial system. Multilateral organizations, such as the World Bank, the United Nations, and governments around of the world, have been working to reduce poverty (Prahalad, 2005). Corporate governance is the foundation for managing and controlling companies (Redmond, 2010). The method of research for this study is founded in the conditional matrix and the theoretical background is supported in corporate governance and social worlds theory. The main questions that will be addressed are as follows. How does corporate governance penetrate Latin American and Caribbean microfinance institutions? Who leads the process of penetration of corporate governance in Latin American and Caribbean microfinance institutions? What is the role of BBVA Microfinance Foundation in penetrating corporate governance in Latin American and Caribbean microfinance institutions? Where do the actions of the BBVA Microfinance Foundation begin in penetrating the corporate governance? When did the penetration of corporate governance in microfinance institutions start with the BBVA Microfinance Foundation? Why did BBVA Microfinance Foundation start to penetrate corporate governance in microfinance institutions in seven Latin American and Caribbean countries? In order to develop future empirical research, two propositions are developed in this paper, both propositions are related to the six research questions. Some of the answers to these questions and propositions are related to corporate governance in microfinance institutions and put in action through the influence of ownership structure. Whoever has the majority ownership has the advantage of leading the culture of corporate governance. Second, when multilateral organizations, such as the Inter-American Bank and the Multilateral Investment Fund, join forces with institutions like the BBVA Microfinance Foundation, they exercise institutional pressure in implementing the culture of corporate governance in microfinance institutions. Third, laws and human rights are the reality for traditional multinational corporations and microfinance institutions. Microfinance institutions are younger than traditional multinational corporations. For this reason, they need to focus more on management and board of directors’ responsibilities and transparency. Fourth, language, geographic distance, and strategic alliances facilitate the implementation of corporate governance culture in microfinance entities of the seven Latin American and Caribbean countries. Keywords Corporate governance principles, conditional matrix, microfinance institutions, and social worlds theory.