Corporate governance and financial sustainability of Microfinance institutions in Nigeria

Financial sustainability is critical to the growth of Microfinance institutions and therefore deserves proper attention by relevant stakeholders. This study investigates the impact of corporate governance on financial sustainability of Microfinance Institutions in Nigeria during the period, 2011 to 2015. We model financial sustainability measurement through the use of Return on Assets (ROA) and Operating Self Sufficiency (OSS). Board independence (BRDIND), board size (BRDSIZE) and gender diversity (GENDIV) were adopted as corporate governance attributes or proxies. The main findings reveal that the regression model is not significant at 1 per cent level with the adjusted R-Squared of 28% and 48% for the respective models. The result of regression coefficient shows that BRDIND (-0.144 and -0.7211) and GENDIV (-0.032 and -0.9119) are not statistically significant with the exception of BRDSIZE (0.245 and 0.278) which shows a significant positive impact on financial sustainability. Our findings reveal that there is no significant relationship between corporate governance mechanisms (board independence, gender diversity) and financial sustainability. Only board size shows a positive relationship with financial sustainability. This paper recommends that microfinance banks should adopt gender friendly policies thereby encouraging more women to the membership of microfinance banks' Boards to take advantage of their expected benefits. Also, this study recommends that the regulatory authorities should ensure that Microfinance banks in Nigeria comply strictly with corporate governance code and sanctions should be meted to erring banks.