Institutional Governance and Greater Financial Inclusion in microfinance

Financial services can be delivered in the long term only with sound, healthy financial institutions. Inappropriate Corporate Governance (CG) of microfinance institutions (MFIs) including Savings and Credit Unions / Cooperatives (Cooperatives) is the main cause for bankruptcy of the MFIs or over-indebtedness of their clients. Based on the experience of a SDC project in Central America on CG reforms and based on similar other relevant experiences and methodologies, FOMIN and SDC will promote CG reforms in Latin America and the Caribbean.

Country/region Topic Period Budget
Latin America
Employment & economic development
Informal banking & insurance
01.02.2013 - 30.09.2022
CHF  2’370’000

Microfinance is considered as an important instrument to reduce poverty. However, MFIs and cooperatives in Latin America and the Caribbean have been created with various mandates (economic, social, gender) and under different legal forms (NGOs, private, public, etc.). Very often, at the moment of MFIs and cooperatives creation best practices of Corporate Governance (e.g. clearly defining ownership, avoiding conflict of interest between owners and managers) have not been considered. Bad governance in MFIs and cooperatives contributed in several countries (Nicaragua, Bosnia, India) to client over-indebtedness and the bankruptcy of MFIs and cooperatives. With the need to access new sources of finance to maintain growth and survive crisis, CG has become a priority in the microfinance industry. Nevertheless, knowledge and capacities for the application of CG principles are lacking.

The SDC project PROMIFIN has developed a unique methodology for CG reform in Central America. This methodology will be further enhanced and improved and knowledge shall be transferred to more actors in the region. The overall objective of this initiative is to improve the CG of microfinance institutions, in particular those with a strong social objective.

The collaboration with IDB/FOMIN (and other partners) allows increasing the outreach of the SDC experience and methodology from Central America to more countries in Latin America and the Caribbean and at the same time to promote SDC social objectives.


The expected impact of the project is to contribute to the soundness and sustainability of MFIs and cooperatives working for the financial inclusion of clients from poor and low-income populations, reflected in improvement of the quality of these institutions’ financial and social performance indicators.

(outreach target: at least 160.000 low-income benefit as new clients in the reformed MFIs and cooperatives)

Target groups

Direct beneficiaries: more than 50 MFIs and cooperatives, more than 20 certified consultants and many more trained, Indirect beneficiaries: probably several million clients of the MFIs and cooperatives who improve their CG, at least 160.000 clients being new clients of the reformed institutions

Medium-term outcomes

Contribute to improve the governance of MFIs and cooperatives serving poor and low-income population segments through implementation of standards and adoption of good practices (more than 50 MFIs and cooperatives in 3-4 countries in the region and more than 20 certified “governance experts” operating in the region.)


Results from previous phases:  

This is the first phase. Results and insights have been derived from the SDC PROMIFIN project in Central America. Evaluations of PROMIFIN have been positive and confirmed during preparation by the IDB/FOMIN (and CAF ) team. As lessons learned have been highlighted: the practical guide developed by PROMIFIN is adequate, intensive training of local consultants is necessary, but qualification of consultants needs to be senior. Finally, a partial subsidy of the CG reform processes to kick-start demand is necessary.

Directorate/federal office responsible SDC
Credit area Development cooperation
Project partners Contract partner
Private sector
  • Foreign private sector North

Budget Current phase Swiss budget CHF    2’370’000 Swiss disbursement to date CHF    2’376’762
Project phases Phase 1 01.02.2013 - 30.09.2022   (Current phase)