What Drives the Social Performance of Microfinance Institutions? The Role of Gender Board Diversity

Abstract

Microfinance Institutions (MFIs)’ business model is mission orientated to empower women and the poor to reach the social mission of sustainable development goals (SDG). This paper investigates whether women directors and institutional factors influence the five comprehensive and underexplored dimensions of MFIs’ social performance including social goals, governance & HR, products & services, client protection and environment. Using an international sample of 2,293 MFIs operating in 116 countries during the period 2010-2018, we find that women directors, female-friendly environment and stronger sustainable development environment have a positive impact on the social performance, whereas country-level governance mitigates the social performance. We find that more gender-diverse board influences particularly three dimensions of social performance: social goals, product & services and environment. The results are more pronounced for non-profit MFIs and MFIs located in a higher-ranked governance environment. MFIs’ social performance in the Africa region are more likely to benefit from a higher ratio of women on board than Eastern Europe and Central Asia region. Our findings provide implications for MFIs, funders and policymakers regarding the measurement and drivers of the social performance of MFIs that is crucial for achieving SDG.