This paper’s main purpose is to systematically review both theoretical and empirical literature about the relationship between corporate governance variables and the performance of microfinance institutions. The theoretical reviews were: agency theory, stakeholders’ theory, resource dependency theory, stewardship theory, and social contract theory, which deal with corporate governance mechanism and their effect on the firm’s performance. Empirical studies carried out in different countries at different times together with other findings, were reviewed to compare the effect of corporate governance mechanisms on the performance of microfinance institutions and to establish areas of gaps for further studies. Board characteristics, which include size, education, meeting frequency, board composition, and board independence, and their effect on the financial performance of microfinance institutions were discussed. The findings of the study reveal that sound corporate governance improves the performance of Microfinance Institutions. The findings of different scholars show a lack of consistency on the effect of corporate governance variables on the financial performance of Microfinance Institutions, so further investigation is required from potential scholars. Finally, theoretical, measurement, and methodological drawbacks of previous studies were identified, and significant recommendations were forwarded for future studies in this area.
Bekana Dembel Tura (Fri,) studied this question.