Effective governance is a critical factor for success of any microfinance institution in India-A review

Building good corporate governance is a continuous process that requires a long term vision. Good governance is central to institutional strengthening efforts and should be integrated with ongoing technical assistance and training initiatives. The MFIs have double goals, namely to act as the medium through which the poor can work their way out of poverty and to provide reasonable profits to their investors. These twin objectives can conflict unless a fair balance is maintained between both objectives. This makes it essential that MFIs have good systems of Corporate Governance. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring. Corporate Governance is also essential to institutional strengthening efforts and should be integrated with ongoing technical assistance and training initiatives. Foreign Institutional Investors (FII) find India very good market for investment but reluctant because of poor corporate governance. One needs to pierce the veil of the Corporates to reach the reality. This article is limited to secondary data only and a few case studies which show effective governance leads to success.