Chief executive officer characteristics and microfinance institutions performance : a global survey

Abstract

This study examines the relationship between formal business education, business experience as CEO characteristics and MFIs performance. It uses a global dataset of 403 rated MFIs located in 74 countries for the period of 2001 to 2009. This study uses random effects panel data estimations to analyses the effect of CEO with formal business education and business experience on return on assets, portfolio at risk of 30 days, which measures financial performance, and average loan size, percentage of women clients and number of credit clients, which capture, outreach performance. The results show that MFIs with CEO with business experience have better return on assets, few loan defaults, smaller loan size, higher percentage of women clients and associated with credit clients’ increase compared to MFIs with CEO without business experience. While MFIs with CEO with formal business education have a higher percentage of women clients, credit clients’ growth and smaller loan size compared to MFIs with CEO without formal business education, the study find no difference in performance on return on assets and portfolio at risk for 30 days. These findings suggest that, in the future, the microfinance industry can benefit from non-microfinance industry CEO with business experience. .