Corporate Governance and Access to Finance - ESBG

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The following indicators measure, in the Beck et al (2007) research, theuse of banking services, restricted to bank deposits and loans because ofdata availability:1. Loan accounts per capita: number of loans per 1,000 people.2. Loan–income ratio: average size of loans to GDP per capita.3. Deposit accounts per capita: number of deposits per 1,000 people.4. Deposit–income ratio: average size of deposits to GDP per capita.These are the indicators also used in a recent and influential report byCGAP (2009). The ratios applied to countries or large regions assume auniform distribution of bank outlets within a country and across itspopulation, while in most countries bank branches and ATMs areconcentrated in urban centers. Beck et al (2007) point out that thenumber of loans and deposit accounts is far from being a perfect proxyof the number of people that use these services in a country. Also, theaverage size of loans and deposits to GDP per capita might not berepresentative of the value of services that a typical individual mightreceive. Despite these shortcomings, their regression results show thatthese variables are positively associated with more households havingbank accounts. Honohan (2007) develops an index that tries to overcomethe usual problem of depositors having several accounts in differentinstitutions. He estimates the fraction of the adult population that usesformal financial intermediaries. The estimates are constructed bycombining information on banking and MFI account numbers (togetherwith banking depth and GDP data) with estimates from householdsurveys for a smaller set of countries.Very few studies linking Corporate Governance practices and Access toFinance can be used to establish the direct link between both. A potentialcausal relationship is even more difficult to ascertain. Mersland and Strøm(2008b) compare two types of microfinance institutions with differentgovernance schemes due to their different ownership structures: nongovernment organizations (NGOs) and shareholder-owned firms.Their conclusions are that there are no differences in terms of length,breath and scope of operations between both types of MFI. In terms ofaccess to deposits, or the average loan, they show that NGOs are moresocially oriented than shareholder firms. Some unexplored mechanismslike competition seem to drive NGOs MFI to behave financially asshareholder MFI.110
For the survival of microfinance institutions Cull et al (2007) find nosignificant relationship between profitability and average loan size.The interpretation is that making smaller loans is not necessarily lessprofitable. No specific test on governance practices is done in the study.Another source of governance related findings is Hartarska (2005), whichshows that, for a sample of central and eastern European MFI, moreindependent boards are more effective. Having larger proportions ofunaffiliated directors is associated with better results. Different stakeholdershave an impact on different outcomes: more donor representativesimprove depth, but have a negative impact on sustainability (profitability).Customers’ representation in the board achieves high sustainability levelsat the expense of depth. Contrary to some of the generally acceptedlinks, audit, rating and central bank supervision have a limited impact onthe outcomes.A general result can be derived from the empirical literature: havingmultiple goals as an organization means that the focus of managers is onmultiple tasks, and evaluating their performance becomes more difficult.As a consequence some of the traditional governance mechanisms,like management performance-based rewards focused only on profits,have externalities. Indeed, the potential transmission of risk to the financialsystem derived from the managers’ incentive schemes would be reducedin these organizations. More powerful boards, and the participation ofstakeholders, under the control of the regulatory bodies, seem to bemore appropriate for these multipurpose institutions, especially whenone of these goals is to increase Access to Finance. Another importantlesson from the literature review is that the financial and institutionalenvironment of the countries influences the Corporate Governance system,especially when the levels of Access to Finance differ substantially.111
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
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nnnAt the same time, the distance a
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The first two elements (the ownersh
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nHowever, this does not mean denyin
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Cooperatives are similar to mutuals
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3.4. FoundationsFoundations do not
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3.5. Good Corporate Governance prac
Page 59 and 60: F. DISCLOSURE AND TRANSPARENCYPrinc
Page 61 and 62: 4. ACCESS TO FINANCE -CONCEPTUAL FR
Page 63 and 64: 4.1. Financial deepening and improv
Page 65 and 66: The board does not have any executi
Page 67 and 68: In other words, sustainable financi
Page 69 and 70: The following table shows how the W
Page 71 and 72: The fourth dimension refers to the
Page 73: Table 8. Access to Finance in the f
Page 76 and 77: Only 27 members established in 21 c
Page 78 and 79: nnDCI (Depth of credit information
Page 80 and 81: 5.2. Corporate Governance and Acces
Page 82 and 83: 5.2.1. Corporate Governance and Ave
Page 84 and 85: Chart 8.Specific Corporate Governan
Page 86 and 87: 5.2.2. Corporate Governance and Ave
Page 88 and 89: Chart 13. Corporate Governance comp
Page 90 and 91: Chart 16. Corporate Governance Inde
Page 92 and 93: Chart 19. Specific Corporate Govern
Page 95 and 96: ANNEX 1: REVIEW OFTHE LITERATUREThe
Page 97 and 98: Even among the relatively narrow un
Page 99 and 100: Figure A.1. Structure of agents' re
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109: The paper examines whether a poor e
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115 and 116: It is one of the major characterist
Page 117 and 118: Although Sparkassen are legally and
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125 and 126: Among the initiatives that the gove
Page 127 and 128: Related to the concession of credit
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143 and 144: The web-based tool www.rededucacion
Page 145 and 146: On the liability side, CMAC offer m
Page 147 and 148: A specificity of CMAC is that the m
Page 149 and 150: Table A.3.MissionMissionCMAC AREQUI
Page 151 and 152: As of September of 2009, the twelve
Page 153 and 154: Furthermore, the consensus culture
Page 155 and 156: ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
Page 157 and 158: ANNEX 4:THE HONOHAN INDEX 43COMPOSI
Page 159 and 160: 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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