> Posted by Brian Busch
The Aligning Interests team from CFI and Calmeadow continued facilitating a wide industry discussion with a fourth roundtable discussion, this time in at ACLEDA Bank in Phnom Penh, Cambodia. Participants discussed several real cases where stakeholders’ interests affected institutional transitions, and they debated potential ways MFIs could make the transformation process as smooth as possible. Heather Clark, who lined up the session, made sure that it was linked with a transformation workshop put on by ACLEDA’s new microfinance training center. The participants of the roundtable, many of whom had completed the training, saw clearly how the need to align stakeholders’ interests is intimately related to other transformation issues, from regulatory concerns to valuation and investor negotiations.
The microfinance sector in Cambodia continues to grow at an amazing pace and the MFIs there have a fantastic local example of how transformation can be done well in ACLEDA Bank, one of the cases highlighted in the paper. ACLEDA’s decisions to invest heavily in management and staff training, an exceptionally inclusive process, and an employee shareholding option all made its transformation successful. However, as the day’s discussion illustrated, ACLEDA’s decisions derived from an honest evaluation of the institution’s history, culture, and operating environment. Participants emphasized the need to create a transparent and open process to discuss stakeholders’ interests and take action to align them, while noting that there is no “one size fits all” solution.
The ethical issues surrounding the means of compensating founders and others who have played key roles in developing organizations were of great concern to the participants. This remains a truly delicate issue for many MFIs. It seems that industry-wide standards on the types and relative amounts of incentives that can be offered to these individuals would help provide clarity. However, there is much debate about the best way to recognize the contributions of stakeholders: while compensation for past work during the institution’s non-profit stage can raise ethical and reputational questions, compensation based on future performance may not always be realistic. Participants struggled with how to address these questions, ultimately concluding that MFIs must tackle them independently until the industry has developed guidelines and standards for these actions.
All in all, it was great to get perspectives from practitioners, regulators, and investors in South East Asia. Thanks to all who participated and to ACLEDA Bank for hosting.