Information Transparency and Agency Costs in the Microfinance Industry

Jacob Yaron and Ronny Manos
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Jacob Yaron: Jacob Yaron is a consultant faculty, School of Business Administration, The College of Management Academic Studies, Rishon Lezion, Israel. E-mail: jacoby@colman.ac.il
Ronny Manos: Ronny Manos is Senior Lecturer, School of Business Administration, The College of Management Academic Studies, Rishon Lezion, Israel. E-mail: rmanos@colman.ac.il

Review of Market Integration, 2010, vol. 2, issue 1, 87-99

Abstract: The microfinance sector is an important ingredient in the process of global integration of the financial markets. The rapid development of the microfinance sector in many developing countries motivated prominent donors to develop systems for standardised and comparable reporting of financial and social performance. This effort has yielded substantial results in terms of promoting transparency, reducing information asymmetries and mitigating agency conflicts in an industry vulnerable to such problems. The article discusses these problems and the steps initiated by the industry to overcome them. We also point to conflicts of interests that may persist because the information platform and the indicators that are being reported are managed and selected by the industry itself. In particular, we use a common indicator of performance, the Operational Self-Sufficiency Index, to highlight the tendency of selected indicators to overstate performance and understate subsidies and costs.

Keywords: Microfinance; Performance Measurements of Micro-finance Institutions (MFIs); Operational Self Sufficiency (OSS); Financial Self Sufficiency (FSS); Subsidy Dependence Index (SDI) (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:sae:revmar:v:2:y:2010:i:1:p:87-99

DOI: 10.1177/097492921000200106

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