The Effect of Corporate Governance Practices on the Loan Performance of Member-Owned Microfinance Institutions in the North West Region of Cameroon
DOI:
https://doi.org/10.47941/jbsm.3528Keywords:
Corporate Governance, Loan Performance, Member-Owned Microfinance InstitutionsAbstract
Purpose: This study addresses the persistent challenge of poor loan performance among member-owned microfinance institutions (MFIs) in Northwest Cameroon, characterized by high delinquency rates, elevated non-performing assets, and inadequate loan recovery, which threaten institutional sustainability and financial stability.
Methodology: The primary objective is to evaluate how corporate governance practices influence loan performance in these institutions. Employing a quantitative, longitudinal panel data approach from 2019 to 2023, the research utilizes robust econometric techniques such as Prais-Winsten regression with Panel Corrected Standard Errors (PCSE) to address issues of autocorrelation, heteroske dasticity and cross-sectional dependence, ensuring reliable estimates.
Findings: The analysis reveals that effective governance mechanisms, such as; active boards, internal controls, transparency, stakeholder engagement, and internal controls positively affect loan performance measures, including; outstanding loans, delinquency and delinquency rates, while weak corporate governance practices exacerbate default risks.
Unique Contribution to Theory, Practice and Policy: Major findings demonstrate that strong governance frameworks and decentralized branch networks significantly enhance loan repayment and reduce delinquency rates. It is therefore recommended that the strengthening of governance structures through independent boards, investing in staff training, enhancing transparency via regular audits, expanding branch networks and implementing formal risk management systems can improve on the situation. The study highlights that fostering responsible governance, aligned with concepts like transparency, accountability, stakeholder engagement and internal controls is vital for mitigating default risks, promoting sustainability, and advancing inclusive financial development in fragile environments like Cameroon.
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Copyright (c) 2026 Cyprian Ambain Chia, Njong Mom Aloysius , Fonkam Nkam Mongwa
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