Aligning Interests: Addressing Management and Stakeholder Incentives During Microfinance Institution Transformations
By Elisabeth Rhyne, Ira W. Lieberman - Published: 2009
There are numerous examples of transforming microfinance institutions in which the alignment or misalignment between the personal interests of key decision makers and the long-term interests of the institution affected the ultimate outcome and future of the organization. Yet to date there has been little formal analysis or discussion of this issue. Without open discussion on how to treat personal interests, the issue is too often relegated to whispered conversations in back rooms. The resulting cost, in terms of institutions not transformed or transformed in an unsatisfactory manner, is not easy to see, but it may be quite significant.
In this paper, the focus on aligning interests speaks to the human elements at play during the decision making about the future of transforming MFIs. The people involved in transforming MFIs—general managers, board members, staff, and even clients—have a personal stake in the outcome of the transformation. The aims of this paper include:
- situating this paper relative to larger issues for the industry and transforming MFIs;
- defining the challenge of aligning interests, within the context of transformation from non-profit to for-profit operating paradigms;
- using examples and cases from actual industry experience; and
- proposing some tentative solutions to these issues in the form of suggested “good practices” and areas that require further industry collaboration.
This paper is available in a shortened version (CEN1E) and in a longer version with case studies (CEN1LE)
Brian Busch and Stephanie Dolan also authored this paper.
