Corporate Governance and Access to Finance - ESBG

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nnIt seems natural to assume that Corporate Governance practicesof WSBI members are linked to their Access to Finance objective.The interactions between these two aspects, however, have neverbeen explored, despite the fact that the role of WSBI members inAccess to Finance and their compliance with Corporate Governancepractices are well established. This study therefore looks at thepotential impact of the Corporate Governance model of memberbanks on their customer outreach, trying to address questions like thefollowing: To what extent is Access to Finance influenced by CorporateGovernance practices or other factors? Are there specific CorporateGovernance practices supporting the compliance with the Access toFinance mandate? Which Corporate Governance practices contributethe most to financial inclusion (or the fight against financial exclusion)?To address these issues a questionnaire was circulated to WSBI members,and five case studies were analyzed- Sparkassen Finanzgruppe inGermany, Kenya Post Office Savings Bank, FEPCMAC (FederaciónPeruana de Cajas Municipales de Ahorro y Crédito) in Peru, the PostalSavings Bank in the Philippines and the Cajas de Ahorros (savingsbanks) grouped in CECA (Confederación Española de Cajas de Ahorro)in Spain. A review of the literature was also conducted (see Annex 1).The link between Corporate Governance andAccess to FinancenCorporate Governance can be defined in very broad terms as themechanisms connecting (i) the interests of the company’s owners andother stakeholders and (ii) the way its board of directors andmanagement exercise their functions (see OECD, 2004). In the case offinancial institutions, Corporate Governance presents a number ofspecificities as a result of their systemic relevance, their dependence ontrust of the clients and the public at large and the fact that they aresubject to strict regulation to limit risk assumption. All this implies thatthe interests of other stakeholders (different from shareholders), likedepositors, taxpayers and employees, are particularly relevant for financialinstitutions, as illustrated by the global financial crisis. Given theirinstitutional configuration, WSBI members are particularly sensitive toa wider group of stakeholders, compared to commercial banks.10
nnAccess to Finance in enshrined in WSBI members business models andpractices, which is reflected in the provision of accessible financialservices through a large distribution network. The model of proximitybanking, the design of special and innovative products for theunderserved population and the attention to the objective of financialeducation are common traits of member institutions. Measuring Accessto Finance is however challenging, both at the country level and at theinstitution level.WSBI members, despite the diversity in their ownership andinstitutional structure, present a number of common elements in theirCorporate Governance. This is explained by two factors: (i) theircompliance with common international standards, such as those ofthe Basel Committee on Banking Supervision, and (ii) their sharing ofthe Access to Finance objective.Statistical evidencenTo estimate the statistical connection between Corporate Governanceand Access to Finance, two dimensions have been considered forboth variables: the country dimension and the institution dimension.For Corporate Governance, the country dimension has a stronginfluence on the institution dimension. Therefore, an overall CorporateGovernance index was calculated taking into account both the countryCorporate Governance environment and the institution CorporateGovernance framework (this is consistent with the literature,according to which the legal and institutional environment affects theCorporate Governance quality of a given institution). For Access toFinance the three most common indicators were used: averagedeposit, average credit and deposits per 1,000 adults. Regressions forthe Corporate Governance indices (as well as their subcomponents)and the Access to Finance indicators were calculated. The resultssuggest that a link exists between Corporate Governance and Accessto Finance, although their statistical reliability could be improvedthrough a larger number of available observations.11
Page 6 and 7: BoxesBox 1. German Sparkassen 27Box
Page 9: EXECUTIVE SUMMARYBackground and obj
Page 13 and 14: Chart A.Corporate Governance, Acces
Page 15 and 16: nThe study also shows that Corporat
Page 17 and 18: 1. INTRODUCTION1.1. Focus and objec
Page 19 and 20: WSBI members are by definition acco
Page 21 and 22: For the particular case of developi
Page 23 and 24: 2. THE LINK BETWEENCORPORATE GOVERN
Page 25: Table 2. Main features of the Missi
Page 28 and 29: Access to financeSparkassen promote
Page 30 and 31: All these examples illustrate how p
Page 32 and 33: In the case of Peru, the profits th
Page 34 and 35: Among the WSBI institutions that re
Page 36 and 37: BOX 2. KENYA POST OFFICE SAVINGS BA
Page 38 and 39: The fact that the banking system is
Page 41 and 42: 3. CORPORATE GOVERNANCE -CONCEPTUAL
Page 43 and 44: Figure 2. Sound Governance of Finan
Page 45 and 46: As can be seen in the figure above,
Page 47 and 48: nnnAt the same time, the distance a
Page 49 and 50: The first two elements (the ownersh
Page 51 and 52: nHowever, this does not mean denyin
Page 53 and 54: Cooperatives are similar to mutuals
Page 55 and 56: 3.4. FoundationsFoundations do not
Page 57 and 58: 3.5. Good Corporate Governance prac
Page 59 and 60: F. DISCLOSURE AND TRANSPARENCYPrinc
Page 61 and 62:
4. ACCESS TO FINANCE -CONCEPTUAL FR
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4.1. Financial deepening and improv
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The board does not have any executi
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In other words, sustainable financi
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The following table shows how the W
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The fourth dimension refers to the
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Table 8. Access to Finance in the f
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Only 27 members established in 21 c
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nnDCI (Depth of credit information
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5.2. Corporate Governance and Acces
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5.2.1. Corporate Governance and Ave
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Chart 8.Specific Corporate Governan
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5.2.2. Corporate Governance and Ave
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Chart 13. Corporate Governance comp
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Chart 16. Corporate Governance Inde
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Chart 19. Specific Corporate Govern
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ANNEX 1: REVIEW OFTHE LITERATUREThe
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Even among the relatively narrow un
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Figure A.1. Structure of agents' re
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The table captures the essence of s
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A case study built by Clarke et al
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A very recent contribution to the d
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For example, in Latin America, WSBI
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The paper examines whether a poor e
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For the survival of microfinance in
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ANNEX 2: CASE STUDIES 32CASE STUDY
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It is one of the major characterist
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Although Sparkassen are legally and
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Figure A.2. Corporate Loans Market
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Financial education is also an impo
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Corporate GovernanceKPOSB is wholly
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Among the initiatives that the gove
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Related to the concession of credit
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OPERATIONS1. Deposit Base: It was p
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Corporate GovernanceThe Central Ban
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To address the problem of capital,
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Financial inclusion ranges very hig
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CASE STUDY 4:SPANISH SAVINGS BANKS
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The uniform financial regulation of
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Figure A.3. Governing Bodies - Span
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The web-based tool www.rededucacion
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On the liability side, CMAC offer m
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A specificity of CMAC is that the m
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Table A.3.MissionMissionCMAC AREQUI
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As of September of 2009, the twelve
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Furthermore, the consensus culture
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ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
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ANNEX 4:THE HONOHAN INDEX 43COMPOSI
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COMPOSITE MEASURE OF ACCESS TO FINA
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ANNEX 5:QUANTITATIVE RESULTSCountry
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Overall Corporate Governance IndexO
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REFERENCES- Andrianova, S., Demetri
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- FSD Kenya (2009), Financial Secto
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- World Bank (2006) The Role of Pos
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WSBI - ESBG - The Global Voice of S
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