The Board Rules: Founding an MFI Board

This booklet, from the Catholic Relief Services Microfinance series, seeks to guide the development of a new governing board of a microfinance institution (MFI). In fact, it charts the tiny individual steps by which a new MFI is created and run. Its audience is therefore people in the field looking for hands-on help and advice in starting a new MFI.

The booklet is divided into three logical sections. The first, “Preparation”, shows how to lay the groundwork for an MFI board: it debunks the myth that common ownership (eg in a credit union) equals better governance, and asserts the necessity of deciding which goal, a social/beneficial or essentially service-driven goal or a profit-driven goal, will take priority in a crisis. It then goes through the different steps needed to build a board and asks provocative questions about the sources of funding and the motivation of board members to participate, as well as which model of MFI to follow, with a very brief point-form comparative chart outlining different choices.

The second section, “The MFI’s Founding”, sets out a very clear sequence of steps to follow in order to establish the best possible board. It describes different phases of development in the life of an MFI: for example, in the first year, an MFI board might need to be small, with five members, but in subsequent years could and often should grow. It offers a sample agreement to be signed by a new board member, and lays out the different roles of various officers among the board members. This section concludes with a short consideration of the creation and passing of bylaws governing the MFI.

The third section, “The Founding Year”, goes into greater detail about the first crucial twelve months of the MFI’s life, including the important task of hiring a Chief Executive Officer (CEO), arranging a calendar of board meetings and board retreats, keeping meeting minutes, making a comprehensive plan of action for the first year, and building a learning agenda so board members can improve their own performance through seminars with experts. The booklet concludes with a description of two sample board meetings, followed by an analysis of why one was disastrous and the other successful.

This handbook is dense but clear, and it should serve as a useful guide to the process of building an MFI board. Text boxes on almost every page offer capsule examples of points under discussion, generally drawn from work undertaken by Catholic Relief Services. Calm and reasonable, it offers an excellent and comprehensive model for new MFIs.

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