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Decoupling in Social ventures: One step forward two step backwards? Commercial Microfinance Organizations
Unformatted Document Text:  Dorado from Nimal’s (2004) study of selected commercial microfinance organizations in Latin America, Asia, and one in Africa. As the table shows, most of the Latin American organizations multiplied their equity manifold and all but two of the Asian organizations doubled their equity. There is also evidence indicating that organizations have increased their access to resources by using savings and borrowing in larger numbers than their NGO counterparts to finance their portfolio (Stephens 2005-- based on a study of 230 microfinance organizations using 2003 data). Insert table 2 Regarding the organizations’ BODs, microfinance observers argue that they have indeed improved. In a recent review Nimal (2004:14) comments that once transformed, organizations have included “persons with either more business or banking experience and, in some cases, independent directors” in their board of directors. The transformation has also brought to BODs “a broader participation of international expertise.” He singles out ACLEDA (Cambodia) and K-Rep Bank (Kenya) as organizations that have particularly benefit from the presence of international directors. In addition, not surprisingly, the transformation has brought increased transparency if only because by becoming regulated organizations have been required to have their financial statements audited and their operations monitored by local financial authorities. Those who have decided to go to international markets for funds, such as BancoSol, Mibanco, or Compartamos have also been rated by organizations with the legitimacy of Fitch or Standard and Poor. In short, the alignment between form and practice seems to have improved with the transition of the organizations from NGOs to commercial institutions. They have gained access to more resources and increase their capabilities. They have also become more transparent and hence more accountable to external stakeholders. 5.2. Form defines practice? Since 1992 when BancoSol was created observers of microfinance have feared that organizations who adopt commercial governance structures will experience pressures that may result into mission drift (Rhyne, 2005). These are some of the reasons. First, in contrast with NGOs, commercial organizations have access to funds not earmarked to support any particular population group. Moreover, only voluntarily do they have to report on their impact on poverty alleviation; a requirement when their funds derived from donations. - 11 -

Authors: Dorado, Silvia.
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Dorado
from Nimal’s (2004) study of selected commercial microfinance organizations in Latin America,
Asia, and one in Africa. As the table shows, most of the Latin American organizations
multiplied their equity manifold and all but two of the Asian organizations doubled their equity.
There is also evidence indicating that organizations have increased their access to resources by
using savings and borrowing in larger numbers than their NGO counterparts to finance their
portfolio (Stephens 2005-- based on a study of 230 microfinance organizations using 2003 data).
Insert table 2
Regarding the organizations’ BODs, microfinance observers argue that they have indeed
improved. In a recent review Nimal (2004:14) comments that once transformed, organizations
have included “persons with either more business or banking experience and, in some cases,
independent directors” in their board of directors. The transformation has also brought to BODs
“a broader participation of international expertise.” He singles out ACLEDA (Cambodia) and K-
Rep Bank (Kenya) as organizations that have particularly benefit from the presence of
international directors. In addition, not surprisingly, the transformation has brought increased
transparency if only because by becoming regulated organizations have been required to have
their financial statements audited and their operations monitored by local financial authorities.
Those who have decided to go to international markets for funds, such as BancoSol, Mibanco, or
Compartamos have also been rated by organizations with the legitimacy of Fitch or Standard and
Poor.
In short, the alignment between form and practice seems to have improved with the
transition of the organizations from NGOs to commercial institutions. They have gained access
to more resources and increase their capabilities. They have also become more transparent and
hence more accountable to external stakeholders.
5.2. Form defines practice?
Since 1992 when BancoSol was created observers of microfinance have feared that
organizations who adopt commercial governance structures will experience pressures that may
result into mission drift (Rhyne, 2005). These are some of the reasons. First, in contrast with
NGOs, commercial organizations have access to funds not earmarked to support any particular
population group. Moreover, only voluntarily do they have to report on their impact on poverty
alleviation; a requirement when their funds derived from donations.
- 11 -


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