Governing Banks: MFI Edition. Part 1: Risk Governance

This toolkit adapts content from a 2008 publication, "Governing Banks," to account for the specifics of regulated microfinance institutions. It provides recommendations on risk governance and an understanding of accounting for banking, the economics of banking, finance, and banking risk management, including how these principles may differ for MFI banks.The layout of this toolkit is in the form of conversations between a hypothetical newly appointed director of an MFI bank and other board members. It discusses bank governance, regulation, accounting, and risk management due to similarities between MFIs and the principles and economics of banking. The toolkit covers the following questions:

• Ideally what kind of skills and background should an MFI bank board have?
• What is risk governance? What is the responsibility of the board with respect to risk governance?
• What is social performance management? What is the responsibility of the board with respect to it? What are risk limits?
• What are the responsibilities of a board chair?
• Why is the independence an authority of the chief risk officer important? How can it be achieved?
• How do risk considerations inform executive and board decisions regarding strategic opportunities, executive remuneration?
• How does a board ensure that it receives the right information?
• What are the advantages and disadvantages of having a board level risk committee?