Corporate Governance Practices and Financial Performance of Microfinance Institutions in Rwanda: A Case Study of Microfinance Inkingi Ltd

Abstract

The study was undertaken to investigate how corporate governance practices can influence the financial performance of microfinance institutions with a case study of microfinance inking ltd. This study specifically analyzed the effect of board size, gender diversity and CEO duality in the governance structures on performance of microfinance institutions. The descriptive method was used to collect data and the target population was forty-six, where 35 were the staff of INKINGI microfinance ltd 11 were members of the board. In data collection at the field, questionnaire and face-to-face discussion were used. To confirm the reliability, the research conducted a pre-test exercise before the actual data collection process. The validity was tested through experts in the domain of financial statements analysis and managerial decision making by asking the supervisor and other lecturers from Mount Kenya University. The researcher used the SPSS as tool of analysis, which helped to summarize the primary data into quantitative data and the researcher given the proper interpretation of the results basing on research objectives and questions. The analysis showed that board size, board independent and CEO duality were positively correlated with financial performance of Rwandan microfinance institutions (r= 0.810, p< 0.00 r= 00.706, p< 0.04 r= 0.623, p< 0.003 and r= 0.431, p< 0.00) respectively. Furthermore, the research showed that the board independence, gender diversity as well as board size have a considerable effect on financial contribution. According to the perception of the respondents, the results showed that corporate governance increases the profitability of the company, customer loyalty as well as extension of product line and services in the company. The study concluded that board size, board independent and CEO duality are important aspects to consider for better governance of microfinance. The study recommended that INKINGI microfinance ltd should improve their gender diversity for better corporate governance that provides diverse viewpoints, values and new ideas to the boards and provokes lively boardroom discussions. The management should appoint more women directors as they possess managerial skills like public relations, human resource and communication skills than operating and marketing skills. Keywords: Corporate governance practices, financial performance, microfinance institutions, Inkingi Ltd, Rwanda