What Can the Financial Inclusion World Learn from FIFA about Governance?

There is nothing like a corruption scandal to highlight the importance of good governance. FIFA, the governing body of world football, is currently in the midst of such a scandal which has indicted 14 people, so far, for an alleged scheme involving more than $150 million in kickbacks and bribes, forcing the resignation of long-time FIFA President, Sepp Blatter. FIFA has a unique governing structure. Its supreme legislative body is a congress of 209 members, each with one vote, and there are more than 27 committees and judicial bodies. However, regardless of the structure itself, FIFA’s recent corruption scandal and change of leadership still very much highlight important governance principles applicable for other organizations, including financial inclusion institutions, to take into account.

The old adage that “power corrupts” is especially true when leaders who lack integrity are left essentially unchecked over an extended period. As a recent Forbes article on FIFA observes, “Over the years, leaders who lack integrity gradually take control of the various levers of power, they surround themselves with acolytes, and they reduce the strength of the mechanisms designed to hold them in check.”

Such a transformation could happen within nearly any organization. Accordingly, for those in our line of work, there is a need within any financial institution to instill a robust governance structure that includes the following:

  • Checks and Balances: It is important that the CEO and board work together and have a good relationship, but also that they keep each other in check – that they question and challenge each other. As one seasoned board member commented, it is the role of the board to have their “noses in and fingers out,” meaning they are not meant to manage the day-to-day but do need to be actively involved in guiding the institution and asking the tough questions. External regulators and auditors also play an important role in providing the necessary checks and balances.
  • Accountability: Boards aren’t always perfect – their members are of course human and can therefore suffer from human tendencies such as biases, group think, etc. However, collectively, if the composition is right, boards do provide the accountability and objective perspective needed from the leadership. It is important for boards to include independent directors without a vested interest in the institution as they provide a much needed impartial voice. It doesn’t work over the long-term for a board to be composed of friends and family who don’t actively question and challenge management. At the recent Africa Board Fellowship kick-off seminar, one of the most memorial take-aways was from René Azokly, former Managing Director of PADME, who stated that a “yes, yes board = yes, yes crisis!”
  • Transparency: Transparency, like accountability, can be hard for institutions to define, let alone implement and monitor. Sometimes transparency can be achieved externally through the media and other third-party industry bodies – for instance the Client Protection Principles call for institutions to operate transparently vis a vis clients, and the Smart Campaign’s Certification program provides a way for institutions to demonstrate that they fulfill that commitment.
  • Internal Controls: A board should have an active audit and compliance committee and sufficient risk management systems in place to reinforce the necessary checks and balances within an institution. However, “checking the box” to say these internal controls are in place is not where the governance story ends (FIFA has an audit and compliance committee). More importantly, the board needs to closely monitor and track these internal controls to make sure they don’t deteriorate over time.
  • Term Limits: Members of FIFA’s 24 person Executive Committee have only a four year mandate but recently-ousted president Sepp Blatter led FIFA for 17 years and was actually re-elected to another five year term after the scandal broke. It is critical that both CEOs and board members have terms limits allowing for sufficient continuity but also for new blood, fresh perspectives, and a check on power.

In the case of FIFA, I imagine the global spotlight will lead to significant governance strengthening for the organization. In our world of inclusive finance institutions, let’s hope we can also learn from the FIFA scandal and take steps to improve governance practices before they cause another crisis. The global stakes are high when nations square off against each other in the World Cup; when financial institutions are trusted with the financial security of the poor, those are some pretty high stakes, too.

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