Internet reporting in microfinance institutions

Abstract

PurposeThis paper aims to present research on how and why microfinance institutions (MFIs) disclose financial and social information on the internet. Legitimacy theory provides the theoretical framework.Design/methodology/approachThe empirical study analysed factors influencing MFIs to publish financial and social information on the internet. The model was tested using regression analysis. The sample consisted of publicly available data from the web sites of 273 MFIs.FindingsThe study found that MFIs' internet presence overall is scarce and that greater levels of disclosure are needed. It was found that large MFIs with a high degree of public exposure on the internet disclose greater amounts of information on their web sites than smaller MFIs with a low degree of public exposure. It was also found that for‐profit MFIs disclose more financial information on their web sites, while non‐profit non‐governmental organisations (NGOs) reveal more social information.Practical implicationsMFIs should be proud to tell the world what they are doing. MFI managers need to remember that transparency increases funds from donors. Donors are mostly based in developed countries, so the internet plays a key role in disclosure and attracting potential donors. Thus, managers of MFIs are encouraged to increase disclosure levels – especially on the internet.Originality/valueAcademic research into the factors that influence MFIs' internet disclosure is still scarce. This is an important area of study because full disclosure offers enormous benefits. Since MFIs have a social mission, they are legitimated in the eyes of their donors by disclosing social information. Since they are also financial institutions, they have to show that they use the funds they receive efficiently.