Abstract

This study investigates the influence of board features on the financial performance of microfinance institutions (MFIs) in Cameroon. Given the pivotal role boards play in guiding and overseeing financial institutions, understanding how various board characteristics impact financial outcomes is crucial for enhancing the effectiveness and sustainability of MFIs.

The research employs a quantitative approach, analyzing data from a sample of MFIs across Cameroon. Key board features examined include board size, board independence, diversity, and the presence of specialized committees (e.g., audit, risk). Financial performance is assessed using indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM).

Findings indicate that board size and composition significantly affect MFI performance. Smaller boards tend to be more agile and efficient, leading to better financial outcomes. Boards with a higher proportion of independent directors exhibit improved oversight and reduced conflicts of interest, contributing to enhanced financial performance. Diversity within the board, including gender and professional background, correlates positively with financial stability and innovation.

The presence of specialized committees is also found to be beneficial. Institutions with active audit and risk committees show stronger financial performance due to more rigorous monitoring and risk management practices. These committees help ensure adherence to regulatory requirements and mitigate financial risks, thereby improving overall institutional performance.

Conversely, larger boards and those with less independence or diversity may face challenges in decision-making and governance, potentially leading to weaker financial performance. Boards with a higher concentration of internal members and limited external oversight may struggle with issues related to transparency and accountability.

The study recommends that MFIs in Cameroon focus on optimizing board size and composition, enhancing independence, and promoting diversity to improve financial performance. Establishing and empowering specialized committees is also advised to strengthen governance and risk management.

In summary, board features play a crucial role in shaping the financial performance of MFIs in Cameroon. By adopting best practices in board composition and governance, these institutions can enhance their financial stability and operational effectiveness, contributing to their long-term success and growth.

Keywords: board features, financial performance, microfinance institutions, Cameroon, board size, board independence, diversity, specialized committees, governance.