THE EFFECTS OF BOARD CHARACTERISTICS ON MICROFINANCE INSTITUTIONS’ SOCIAL PERFORMANCE IN KENYA

Abstract

With the growing competition of globalization, strategic decision makers have been faced with the competing interests of external and internal stakeholders such as greater diversity in corporate governance, undertaking more investments in corporate social responsibility and maximizing financial performance. As a result, strategic decision makers today must not only increase their financial performance, but also satisfy the increasing expectations of customers, suppliers and society as a whole. The objective of this study was to examine the effects of the board characteristics on the social performance among Kenyan MFIs. It focused on the board size, board terms, board committees, director remuneration, multiple directorship, boards’ skills and experience and the independence of directors. This study adopted positivist approach, deductive approach and explanatory research design. Population of the study consisted of all the MFIs registered by the AMFI as at 31st March 2012. Data was analyzed using quantitative and qualitative methods. Qualitative data was analyzed to yield descriptive, Pearson linear correlation coefficient, one way ANOVA, linear multiple regression and inferential statistics. The major findings of the study are: that a significant negative relation exists between social performance and board size, director remuneration, independence of directors while multiple directorship, existence of board committees are positively related. Multiple directorship has no effect on the social performance of an MFI. Overall, the results show that MFIs in Kenya can improve their social performance by improving on their board composition in line with the Capital Markets Authority guidelines.