Corporate Governance and Financial Inclusion

Abstract

The paper focuses on a scantly researched phenomenon, namely, the extent to which financial inclusion is influenced by corporate governance practices. The question that normally arises is whether corporate governance practices are tailored to supporting the financial inclusion mandate. The other question is whether there are certain corporate governance practices that advance financial inclusion. This paper reviews extant empirical literature on these matters with a view of stimulating debate on the subject. Cognisant that institutions that advance financial inclusion are largely financial institutions, the starting point is relating to contemporary corporate governance practice in financial institutions. We know that financial institutions belong to a specific class of corporations whose failure affects society at large because of the financial services they provide. As a result, they are heavily regulated and their corporate governance structures are bound to differ from those of conventional firms. Similarly, we know that financial inclusion institutions are special types of financial institutions with mandates to provide financial services to underserved population segments which equally require special treatment. The scant literature available shows, albeit not conclusive, some evidence of a positive relationship between sound corporate governance and financial inclusion. However, more research on how corporate governance affects different dimensions of financial inclusion is recommended.