Business Organisations In A Global Context Commerce Essay

Business Organisations In A Global Context Commerce Essay The process of strategic planning is not simple and easy one, it involves a lot of industry research and clear understanding of your market, your customers, your competitors, your team, your core competencies, the environment in which you are operating, changing parameter, your vision and mission etc. These are not easy question to answer as well as its not a quick process. Effectively management of people can produce substantially enhanced economic performance. A plethora of terms have been used to describe such management practices: high commitment, high performance, high involvement, and so forth. A social unit of people, systematically structured and managed to meet a need or to pursue collective goals on a continuing basis. All organizations have a management structure that determines relationships between functions and  positions, and subdivides and delegates  roles,  responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they affect and are affected by the environment beyond their boundaries. Globalisation is a phenomena that is used to interact among different countries attempting to develop global economy. It is a process of connecting the worlds markets and business with each other. It is basically a process by which different economies, cultures and societies are combined together by latest communication system. Globalisation has been defined by different experts at different places, according to an economist Harris (1993), the increasing internationalisation of the production, distribution and marketing of goods and services is globalisation. Another definition of globalisation is the functional integration of national economies within the circuits of industrial and financial capital.(Rhodes, 1996). The key differences between global business operations:- Businesses operate in a global context: even if they do not trade directly with other countries, they might be affected by a domestic shortage of skilled labour or may be subject to developments on the global financial markets. Globalization and international business as business terms are often used synonymously in casual conversation. As economic pressures continue to abound, many corporations are looking within their organizations to determine how to improve operations and reduce costs. Cost constraints, efficiency gains and productivity measures are commonly sought to achieve this objective. It is no surprise that development of or improvement in an enterprises service delivery model is desired. Many companies have developed some aspect of shared services, and many more have embraced the outsourcing service delivery model as one lever to drive economic improvement. However, we believe there are plenty of opportunities remaining with respect to shared services in general along with some terrific opportunities for an emerging concept called global business services to drive significant improvement and manage all service delivery model alternatives. WHAT DO WE MEAN BY SHARED SERVICES? A successful shared services model typically incorporates these concepts: Focused company resources Process ownership as a key characteristic Critical values of partnering, teamwork and adding value Effective leverage of tools and technology Accountability by specialists with service focus (internal and external) Strong communications and governance principles Centre of excellence and a company asset for developing talent Results that emphasize efficiently meeting customer requirements Focal point for company best practices Responsibilities of organisations Importance of ethics in the business world is superlative and global. New trends and issues arise on a daily basis which may create an important burden to organizations and end consumers. Nowadays, the need for proper ethical behaviour within organizations has become crucial to avoid possible lawsuits. The public scandals of corporate malfeasance and misleading practices, have affected the public perception of many organizations. An organizations responsibilities are not limited to primary stakeholders. Although governmental bodies and regulatory agencies do not usually have ownership stakes in companies in free-market economies, they do play an active role in trying to ensure that organizations accept and meet their responsibilities to primary stakeholder groups. Organizations are accountable to these secondary stakeholders. All companies, especially large corporations, have multiple stakeholders. One way of classifying stakeholder groups is to classify them as primary or secondary stakeholders. Primary stakeholders have some direct interest or stake in the organization. Secondary stakeholders, in contrast, are public or special interest groups that do not have a direct stake in the organization but are still affected by its operations. The impact of external factors on organisations: There is a simple rhyme which goes: Environment to each must be. All there is that isnt me. You can see therefore that the business environment consists of all those things outside the business. The business needs to keep a watchful eye on the environment because it is continually changing. Key elements in the environment are: 1. Competition. Rival companies are continually changing what they have to offer. They may lower prices, bring out new products, engage in exciting new advertising campaigns, and a range of other activities. 2. Political factors. The action of government affects business and other organisations. Governments are continually changing the rules and the laws that affect business. This is illustrated by the way in which government rules affect schools. Simon Jenkins in an article in The Sunday Times, on 24 September 2006 illustrates this well when he wrote: This government tries to keep control of every school. Since coming to office its education department has issued 500 regulations, 350 policy targets, 175 efficiency targets, 700 notes of guidance, 17 plans and 26 separate incentive grant streams. 3. Economic factors. The economy consists of businesses, individuals and government. The international economy consists of the economies of all the countries in the world. The economy consists of many markets the market for goods, the market for services and the market for money are key parts of this. These markets determine the price that business has to pay for its resources such as labour, and raw materials. Businesses are continually affected by changes in the economy. 4. Social factors. Society is made up of all the people in a given area. It is important to be able to find out what the main trends are that are happening in society because these trends affect business. For example, changes in age patterns, such as the increasing numbers of older people in the population, determine which goods are popular. Then there are social trends which are affected by fashion for example this year some goods will be in, whereas next year nobody or very few people will want to buy them. 5. Technological factors result from the development of new techniques, i.e. new types of products and new processes to make products. For example, recent years have seen a massive change in information technology which has transformed the way we run our lives. For example, today more than 90% of young people possess a mobile phone. (www.acquaint.me.uk) The impact of global factors on business organisations Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy. a. Social factors These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management. b. Legal factors These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health safety and employment law, etc. c. Economic factors These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations. d. Political factors This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, governments policy on the economy etc e. Technological factors These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate wi th their customer in any part of the world. (http://www.businessteacher.org.uk) Strategies employed by organisations operating globally Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm long term corporate strategy. Operations strategy addresses very broad questions about how these major resources should be configured to achieve the desired corporate objectives. Some of the major long-term issues addressed in operations strategy include: à ¢Ã¢â€š ¬Ã‚ ¢ How large do we make our facilities? à ¢Ã¢â€š ¬Ã‚ ¢ What type of processes do we install to make the products or provide services? à ¢Ã¢â€š ¬Ã‚ ¢ What will our supply chain look like? à ¢Ã¢â€š ¬Ã‚ ¢ What will be the nature of our workforce? à ¢Ã¢â€š ¬Ã‚ ¢ How do we ensure quality? (http://highered.mcgraw-hill.com/sites/dl/free/0070922837/158533/sample_ch2.pdf). Managing culture, society and economy challenges Companies move to other countries to expand their business and to increase the profits. When companies do move to other countries they face different challenges like meeting local customers demands, understanding the rules or regulations of local government, language problems etc. If we sum up these problems generally there are three main problems in moving business to overseas countries which are social, cultural and economic factors. Companies do have to understand the culture of the country so that they can run their business properly. They have to understand their social customs and economy of the country. For example McDonalds, KFC or Subway, these companies have operations all over the world. They sale poultry, pork and meat products. Now expanding their business to Asian countries, they first get knowledge about their social, cultural and economy factory. Taking example of Muslim countries, when these three companies moved to Muslims countries they cannot sell Pork or Non-Hala l products in Muslim countries because it is against their cultural values or religious values. So they do sell Halal products to these countries and avoid selling of Pork. This shows that companies have to change themselves according to local culture and social life to do good business in other countries. Also they do offer prices according to local economy or purchasing power of customers. They cannot apply the same prices both in US, UK, India and Pakistan because the economic condition of all these countries is different. Conclusion There is no doubt that with the progress in globalisation living standard of people in many countries has improved but there is also no denial to the fact that most of benefits are being gained by developed countries. They are exploiting the rights of developing countries in the name of globalisation. The income gap between developed countries and developing countries has been increased which is a matter of concern. Through globalisation many companies have also gained benefits especially multinational companies and big companies. They are getting huge profits through globalisation. But they are also exploiting peoples right to some extent, like they are not giving the same pays to developing and developed countries.

The Crucible: Troubles in the Proctor Household

Emotions Run High in Proctor Household In the beginning of Act II of Arthur Miller’s play, The Crucible, the story presents an interaction between John Proctor and his wife, Elizabeth. The interaction between the couple emphasizes that their relationship is anything but normal than that of a married couple. The main cause of their awkward relationship stems from Johns wandering lust. John Proctor has conflicting emotions towards Elizabeth because both of them are trying to avoid the huge fact that he committed adultery.The conflicting emotions are present when John Proctor tries to avoid confrontations with his wife, the small talk between them where John constantly tries to please Elizabeth, and the lack of mutual agreement between them. Throughout the scene, John Proctor tried very hard in order to avoid altercations with his wife. In a patriarchal society of the 1600’s, it would be very common for a woman to be subservient towards her husband.In the Proctor household , it is no different since Elizabeth quietly questions her husband’s authority because she â€Å"fear(s) to anger him† although she has all the leverage she needs in an argument by simply stating the fact that he cheated on her (Miller 53). However, John displays the complete opposite behavior of what is expected of a male in a patriarchal society. Firstly, when John comes home and tastes the soup his wife prepared, he is â€Å"not quite pleased† with it for it was not seasoned well (Miller 49).After adding more salt himself, John notices that Elizabeth is intently watching him taste the soup. Instead of being a typical husband back in the 1600s by criticizing such a small mistake about how his food is seasoned, he compliments on how good-tasting the soup is while knowing that it was the product of his handy-work. By holding his tongue, he avoids a confrontation between him and his wife over a very small issue of not putting enough salt in the soup.Additionally, John seems not to be the typical male in his society when he, â€Å"as gently as he can† asks for some cider (Miller 51). It is clear that this is not what his normal behavior would be because, as Elizabeth is fetching him his cider, she feels â€Å"a sense of reprimand†¦for having forgot† (Miller 51). Because Elizabeth felt as if she did something to wrong her husband, she expects that John will make a huge fuss over the issue. However, John casually brushes off her mistake by just changing the subject to him tending to the fields.His careful behavior towards Elizabeth makes him adopt the tone of a husband that has done something to immensely displease his wife and is trying not to anger her. Clearly, it shows that John has conflicting emotions towards his wife because he wants to act as a typical husband back in the 1600s, but he remembers the heinous crime he committed and tries to avoid confrontation and the possibility of the two of them talking about his mi stake. John Proctor’s entire conversation with Elizabeth is mostly saying things to please her in an attempt to make-up for his affair.For example, while eating his meal he makes constant remarks about their farm being extremely big and the reason for coming home so late was because he was busy â€Å"planting far out to the forest edge† (Miller 49). In this obvious attempt to please Elizabeth, John hints at the fact that he has worked very hard on their farm. By hinting at this, he hopes to show Elizabeth that he is working for the greater good of the family and that he is not spending time with Abigail.Furthermore, John wants to make sure that Elizabeth sees all his hard work when he suggests that on â€Å"Sunday†¦ (they’ll) walk the farm to together† (Miller 51). The above passage clearly shows how much John is trying to please Elizabeth because he openly said that they would go explore the farm on Sunday which is supposed to be dedicated to a day of prayer where no one is supposed to do any work and if an individual skips church service, they would get in trouble.Secondly, John tries to please Elizabeth with material wealth when he breaks the awkward silence between them by explicitly saying that â€Å"if the crop is good I’ll buy George Jacob’s heifer. How would that please you? † (Miller 50). By asking Elizabeth her opinion on what she thinks about his decision to buy a heifer shows an atypical relationship between a husband and wife back in the 1600s since the male usually does not ask for their wife’s opinion on their decisions and that John is also trying hard to please his wife.The typical male attitude toward women voicing their opinions on things is also present in John’s demeanor when he explodes at the slight thought that Elizabeth â€Å"has lost all faith in him† due to the fact that he â€Å"faltered slightly† at the thought of hurting Abigail’s reputation ( Miller 54). The constant battle in John’s demeanor to act as the man of the house as well as the caring husband act he is struggling to put up in order to make up for his mistake is an example of the conflicting emotions he is experiencing while dealing with his wife.

Socio-Economic Inequality in South Africa is Due to the...

Socio-economic inequality in South Africa is due to the institutionalised ideological mismatch regarding labour and economic policy Economic growth is shaped by policy context and promoted most effectively when it is consistent with either liberal market or co-ordinated market ideal type varieties of Capitalism. Policy inconsistency dampers economic growth post-apartheid South Africa attempted to adopt a social-democratic and co-ordinated variety of Capitalism. This failed due to the adoption of macro-economic neo-liberal policies. Organised labour protected labour market policies which lead to policy inconsistencies with regard to trade liberalisation. Trade liberalisation combined with labour market protection leads to unemployment.†¦show more content†¦A social democratic or coordinated variety of capitalism seemed like South Africa’s destiny. CME-type coordinated wage setting seemed realistic and major effort was put into developing regional and national-level social democratic institutions. Organised business and labour agreed to discuss the impact of labour relations on the economy. National Economic Development and Labour Council (NEDLAC) According to the leading business representative â€Å" Nedlac was intended to inaugurate a new era of inclusive consensus-seeking and ultimately decision making in the economic and social arenas† (Parsons 2007, 9). Nedlac failed. The first obstacle was the fact that peak- level business organisation was racially divided which made national coordination impossible. BSA turned into BUSA and from it emerged BBC. The second blunder came from government when they only referred some economic policies to Nedlac. The post-apartheid Labour relations act was negotiated in Nedlac before it went to parliament; sadly they neglected to send the 1996 â€Å"Growth Employment and Redistribution (GEAR)† macro-economic framework through Nedlac. Even though it would curb government spending, enhance private investment and liberalise aspects of the labour laws to promote job creation, it was still met with great public condemnationShow MoreRelatedOrganisational Theory230255 Words   |  922 Pagesorganization theory with several new thinkers and ideas. Pedagogically a well-structured book with many clear learning objectives, cases, examples and good summaries for every chapter. Professor Martin Lindell, Hanken Business School, Swedish School of Economics and Business Administration, Finland This book makes it easier to understand the current stand of organization theory. I strongly recommend it to anyone seriously interested in the different intellectual traditions that contribute to our understanding

Performance Of Microfinance Institutions In Mediterranean Countries - Free Essay Example

Sample details Pages: 21 Words: 6429 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? This paper examines empirically the relation between governance mechanisms and the performance of Euro-Mediterranean microfinance institutions (MFIs) in terms of outreach and sustainability. Specifically, we found that performance-based compensation of managers is not associated with better performance of MFIs. The results identify tradeoffs between MFIs outreach and sustainability depending on larger boards size, and on higher proportion of unaffiliated directors. Don’t waste time! Our writers will create an original "Performance Of Microfinance Institutions In Mediterranean Countries" essay for you Create order Moreover, the study shows that the more women there are on a board the better the performance, and reveals that external governance mechanisms help MFIs to achieve better financial performance. This study also allows us to distinguish other factors leading to a better sustainability such as Regulation, the use of individual lending methodology. However, the MFIs active as NGOs seem to be more consistent with their social mission than with their financial performance. 1. Introduction Microfinance is the provision of financial and non financial services to the poor who are excluded from financial/credit markets because they are considered unbankable. Indeed, microfinance institutions has evolved primarily as a consequence of the efforts individuals and assistance agencies committed to the idea of ensuring that the poor people has access to some form of credit. The majority of MFIs claims having a dual mission of reaching poor borrowers (outreach), and being financially sustainabl e (sustainability). While the social goals of reaching the poorest and poverty alleviation are valid, financial sustainability has emerged as one of the core management and governance issues. The shrinking resources base for donor funds to support the increasing demand for grants and soft loans implies that MFIs will eventually have to support themselves (Ledgerwood, 2000). However, their sustainability will focus on governance structures within the industry. Indeed, as M Labie (2000) observes, in the last decade corporate governance principles have imposed themselves as the basic rules for any well Run Company to follow. The trend has however transcended from traditional business companies but is now part of the globalization process often seen as a tool for standardizing the controlling vision for any major organization in the world. The drive towards Governance has been propelled by a number of factors particularly the collapses of some of the major players in the Industry, th e influx of private Equity and fall in donor funding. Governance is about achieving corporate goals. The fundamental purpose of MFIs is to contribute to a country development. This involves reaching out to more clients especially the poor (Helms, 2006; Johnson et al., 2006). Not least but now growing in importance especially among donors is the requirement that MFIs achieve financial sustainability. Microfinance practitioners assert that good governance is the key to a successful MFI (Campion, 1998; Rock, Otero Saltzman, 1998; Labie, 2001; CGAP, 2006; Helms, 2006; UN, 2006). In spite of these observations, only few studies have focused on governance and the examination of the linkage of various governance mechanisms and performance (McGuire, 1999). It seems relevant to examine closely the role of various governance mechanisms since MFIs managers control significant resources. Except the study of Hartarska (2005), and those of Mersland, Roy and StrÃÆ' ¸m, Reidar ÃÆ'ËÅ"yst ein (2007), and Cull et al., (2007), no more study attempt to shed light on the link between governance and performance especially in the Euro-Mediterranean countries although it is a very active zone with a microfinance industry quite diverse (NGO, NBFI, Bank) where actors should simultaneously pursue the most effective way of realizing their social objective while achieving superior levels of profitability. While exploiting recently conducted survey by the authors in order to study the efficiency of MFIs in Mediterranean countries, the annual financial reports of the microfinance institutions and other relevant information collected from Microfinance Information Exchange (MIX), this paper aim to investigate the link between governance and Euro-Mediterranean MFIs performance in terms of outreach and sustainability since governance guides an institution in fulfilling its corporate mission and protects the institutions assets over time. As Rock, R, Otero, M Saltzman, S (1998) not es it is a key in guiding management in strategic issues and in carrying out the agreed upon strategic plans. The empirical model explores the joint and individual effect of management compensation, board diversity, and external governance mechanisms on both MFI sustainability, and the depth and breath of outreach while controlling for individual characteristics and, as well as country specific factors. The results show that performance-based compensation does not improve performance. MFIs with larger boards seem to do better. More independent boards are more effective however. Board diversity (Higher proportion of women) seems to ameliorate outreach. External governance mechanisms especially auditing and regulation improve the financial sustainability. The remainder of this paper is organized as follows. Section 2 deals with the research context. Section 3 briefly reviews the few related studies. Section 4 presents the conceptual framework as well as working hypothesis. Section 5 looks at data description and methodology. Section 6 discusses the empirical findings, and Section 7 draws conclusions emanating from the findings. 2. Microfinance in Mediterranean Experience throughout the world has proven that microfinance help the poor to increase income, built their business, and secure their future by reducing their vulnerability to external shocks. Furthermore, microfinance is often a powerful tool for empowering the poor especially women, to take charge of their economic well-being and those of their families. The Euro-Mediterranean region consists of 21 countries. The microfinance industry in this zone is young with high growth potential. Currently, it is estimated that there are over sixty microfinance institutions (MFIs NGOs), and a potential of numerous other producing credit to poor microentrepreneurs (Ben Soltane, 2008). The majority of these programs are south of the Mediterranean (Egypt, Jordan, Lebanon, Morocco, Palestine, Tunisia, and Syria). Programs also exist in Spain, France, Italy, Kosovo, Albania, Bosnia, and Croatia (Figure 1). Morocco AMSSF, FMBC, KARAMA, AL AMANA, ZAKOURA Turkey MAYA Bosnia Bossel, EKI, MI-Bospo, MIKRA, Women For Women Palestine FATEN, UNRWA Italy FRD, 10 Talenti Fond S.M.Soccorso Fond S.G.Moscati Tunisia ENDA, BTS Spain CODESPA, WWB Spain Egypt ESED, Lead foundation, DBACD, Al Tadamun France CSDL Albania PSHM, USCA Croatia DEMOS Lebanon Al Majmoua, Ameen, CHF-AM Jordan MFW, AMC, JMCC,DEF Kosovo P4, Meshtekna, Grameen Trust Figure1  [1]  : MFIs delivering microcredit in the Mediterranean. Euro-Mediterranean MFIs aim to provide financial services to low income households, even the extremely poor in a participatory and non-paternalistic development approach to the great interest of the donor community, policy makers, development researcher and practitioners. According to the so-called win-win proposition MFIs should combine the socials goals, such as poverty alleviation and reaching poor households (outreach) with operational and financial self-sufficiency (sustainability) based on access to international financial markets independently from international development agencies. Therefore, MFIs should simultaneously pursue the most effective way of realizing their social objective while achieving superior levels of profitability. The regionà ¢Ã¢â€š ¬Ã¢â€ž ¢s top MFIs are openly committed to best practice microfinance. In terms of depth of outreach, the sector has generally moved towards serving more and more of the poor clients. According to the FEMIP and Sanabel study, the Mediterranean represents a potential market for the microfinance with nearly 40 million customers, whereas currently only 9 million people profit from the financial assistance of the companies operating in this sector. The number of borrowers increased of more than 43 % per annum between 2004 and 2006, against 20% on a worldwide scale, an indication that the sector as a whole is reaching more of the marginalized in the society. The regionà ¢Ã¢â€š ¬Ã¢â€ž ¢s top MFIs have proven also to have excellent leadership abilities, impressive outreach and growth, as well as a commitment to best practice microfinance. Furthermore, it is estimated that around 85% of the regionà ¢Ã¢â€š ¬Ã¢â€ž ¢s active clients are served by sustainable MFIs. 3. Literature review Governance in microfinance has been recognized to be an important issue. However, the biggest problem to microfinance practitioners has been balancing the dual mission of outreach and sustainability. The changing of microfinance environment has shown a move towards sustainability ultimately leading to governance issues as donors funds shrink and equity inflows increase in the microfinance sector. Microfinance institutions have therefore embraced boards and adopted principles of corporate governance to ensure their survival. Investigating the link between good governance and the performance of MFIs in terms of outreach and sustainability is crucial since governance guides an institution in fulfilling its corporate mission and protects the institution assets over the time. However, there is a limited academic studies dealing with this subject, partly due to the lack of data. While using three surveys of rated and unrated east European MFIs from three random samples in the perio d 1998 to 2002, Hartarska (2005), investigates the relation between governance mechanisms and financial performance. Financial performance and outreach constitute dependant variable dimensions and governance mechanisms include board characteristics, managerial compensation, and external governance mechanisms such as rating, financial statements audited, and supervision. The author finds that performance-based compensation of managers is not associated with better performing MFIs; lower wages suggested for mission-driven organization worsen outreach. She identify also that a more independent board has better ROA, but a board with employee directors gives lower financial performance and lower outreach. Finally, the author concludes that external governance mechanism seems to have a limited role in the study region. In a recent study, Mersland, Roy and StrÃÆ' ¸m, Reidar ÃÆ'ËÅ"ystein (2007), use a self constructed global data set on MFIs spanning 57 countries collected from thir d-partly rating agencies. The authors study the effect of board characteristics, ownership type, competition and regulation on the MFIs outreach to poor clients and its financial performance. They found that split roles of CEO Chairman, a female CEO, and competition are important explanation. Moreover, the authors found that larger board size decrease the average loan size, while individual guaranteed loan increase it. Finally, they conclude that there is no difference between nonprofits organizations and shareholder firms in financial performance and outreach. A third study conducted by Cull et al., (2007) looking at MFIs financial performance and outreach as well, with a focus on lending methodology  [2]  , controlling for capital and labour cost as well as institutional features. While using data from 124 rated MFIs, the authors found that MFIs that focus on providing loans to individuals perform better in terms of profitability. Yet, the fraction of poor borrowers and fem ale borrowers in the loan portfolio of these MFIs is lower than for MFIs that focus on lending to groups. The study suggests also that individual-based MFIs, especially if they grow larger, focus increasingly on wealthier clients, a phenomenon termed as à ¢Ã¢â€š ¬Ã…“mission driftà ¢Ã¢â€š ¬?. This mission drift does not occur as strongly for the group-based MFIs. However, no governance variables, such as board characteristics or ownership type are taken into consideration. The limited academic investigation into the link between governance mechanisms and performance of MFIs in terms of outreach and sustainability, and the fact that other governance mechanisms such as the proportion of women in the board remain unexplored justify the importance of a similar study in the Euro-Mediterranean zone, characterized by a very active and quite diverse microfinance industry, that complete formers studies. 4. Conceptual framework and working hypothesis While focusing on the microfinance field, the governance can be defined as the process of guiding an institution to achieve its objectives while protecting its assets. It refer to the mechanisms though which donors, equity, investors, and other providers of funds ensure themselves that their funds will be used according to the intended purposes (Hatarska, 2005). The presence of these control mechanisms is crucial either to align the interests of managers and providers of funds since they may have diverting preferences and objectives, or to monitor the performance of managers to insure that they use their delegated power to generate the highest possible returns for the providers of funds. This notion comes from the agency perspective. It found its origins in the work of M. C. Jensen and W. H. Meckling, 1976 who assimilate the firm to a node of contracts. The explanatory model of the structures of financing and shareholding is founded on the assumption of asymmetry of information and conflicts of interests between managers and providers of funds. According to M. C. Jenson and W. H. Meckling, agency relationship is a contract under which à ¢Ã¢â€š ¬Ã…“one or more persons (principal) engage another person (agent) to perform some service on their behalf, which involves delegating some decision-making authority to the agentà ¢Ã¢â€š ¬?  [3]  . In this case the relation of agency will relate the principal (owner) and his agent (manager), this last being engaged to serve the interest of the first. From these relations emanates the concept of agency costs, costs which result from the potentially opportunist character of the actors (moral hazard) and information asymmetry between the contracting ones (adverse selection). These agency costs represent the loss in value compared to an ideal situation where there is no information asymmetry and conflict of interests. According to the theorist of agency an organisation is considered efficient if it minimise the agency costs. This purpose can be intended though an effective governance mechanism. According to Keasey et al., 1997, the most important features of an effective governance framework are ownership structure (including institutional and managerial ownership), CEO (manager) and director (board member) remuneration, board structure (size and composition), auditing, information disclosure, and the market for corporate control. Usually, research literature related to this field use partial measures. In other words, governance studies treat separately the impact of each variable such as compensation, board size, independence and diversity, and external market forces on firm performance. However, since latest studies (Hermalin Weisbach, 2003) identify the complementarities, and the correlation between these mechanisms, this study will investigate the impact of the majority of these mechanisms excluding ownership due to lack of data on ownership structure. The most important attribute tha t distinguishes microfinance institutions from other is what has come to be called its dual mission of balancing a social agenda or social impact with its financial objectives. The MFI combine a social development mission (provision of financial services to the lowest income population possible), with a financial objectives that drives the institution to achieve self-sufficiency and thereby accomplish sustained service delivery without dependence on subsidies. These dual objectives (social: outreach, and financial: sustainability) make difficult the study of governance of MFIs, especially with their different types: Non profit, Non-Governmental Organizations (NGOs), For-profit Microfinance Institutions, Credit Unions. This challenge is surmounted by formulating and testing hypothesis based on insights from the literature on corporate governance, formers studies, governance in banks and in non profit organizations, and by estimating the impact of the governance mechanisms on both sus tainability and outreach. 4.1. Internal Governance mechanism The incentives of top management have been characterized as an important mechanism of corporate governance as it ensures the alignment of the management and the shareholders interest (John et al., 2004). In other words, it serves as a mechanism for resolving the conflict of interest among the managers and shareholders. Brick, Palmon and Wald (2006) highlighted that director compensation should also affect performance of a firm. With regards to banking institutions, higher-powered incentives may encourage managers to take higher risks at the expense of depositors, who would suffer if the institution fails; thus low pay-performance sensitivity is suggested (John John, 1993). In fact, it is proved by Adams Mehran, 2003; Houston James, 1995; John Qian, 2003, that pay-performance sensitivity in banking in lower than other industries. Since in non-profit firm there is a growing problem of informational asymmetry between clients and managers (i.e., managers possess many crucial inf ormation about the product), it seems that the fixed management salaries is the best choice for mission-driven organizations (Easley Oà ¢Ã¢â€š ¬Ã¢â€ž ¢Hara, 1998). With the fixes salaries, the managers, indifferent between telling the truth or lying, will find it in his benefit to tell the truth. Therefore, if the client and donors find the information provided by non-profit managers more credible, the firm will be better-funded and better-performed. Hypothesis 1. MFIs whose manager receives a fixed salary will not perform worse than MFIs whose managers receive performance based remuneration. Most guidelines recognize that the board of directors is the focal point corporate governance. The composition and structure of the board have a direct bearing on corporate governance. Board of directors is designate for the purpose of ensuring the alignment of the firm activities and its specified objectives. The board has the duty for making sure that the top managers are behaving in a way that will provide the optimal value for shareholders (Coles et al., 2001). There is a view that larger boards are better for corporate performance because they have a range of expertise to help make better decisions, and are harder for a powerful CEO to dominate. However, recent thinking has leaned towards smaller boards. Jensen (1993) and Lipton Lorsch (1992) argue that large boards are less effective and are easier for a CEO to control. When a board gets too big, it becomes difficult to co-ordinate and process problems. Smaller boards also reduce the possibility of free riding by individual directors, and increase their decision taking processes. Empirical research supports this. For example, Yermack (1996) documents that for large U.S. industrial corporations, the market values firms with smaller boards more highly. Eisenberg et al. (1998) also find negative correlation between board size and profitability when using sample of small and midsize Finnish firms. In Ghana, it has been identified that small board sizes enhances the performance of MFIs (Kyereboah-Coleman and Biekpe, 2005). Mak and Yuanto (2003) echo the above findings in firms listed in Singapore and Malaysia when they found that firm valuation is highest when board has five directors, a number considered relatively small in those markets. In a Nigerian study, Sanda et al (2003) found that, firm performance is positively related with small, as opposed to large boards. Hypothesis 2. Board size should have an inverse correlation with MFIs performance A third common monitoring mechanism advocated by the agency perspective is a board composed of a majority of independent directors. These non-executive or outside directors are believed to provide superior benefits to the firm as a result of their independence from firm management. Under this organizational design, conflicts of interest can be avoided and executive leaders can be evaluated more objectively. The literature suggested t hat increases in the proportion of outside directors on the board should increase firm performance as they are more effective monitors of managers (Adams and Mehran, 2003). The proportions of the outside directors can be measured in terms of the ratio of outside directors to board size. The positive aspect of having board independence was evidenced in a study by Byrd et al (2001) that highlighted the survival of firms in the thrift crisis due greater proportion of independent directors in the board. Kyereboah-Coleman and Biekpe (2005) found also a positive relationship between proportion of outside board members and performance of MFIs in Ghana. Hypothesis 3. MFIs performance will be affected positively by the proportion of non-affiliated outsiders on the board. Corporate governance literature argues that board diversity in terms of women and minority representation is potentially positively related to firm performance. Board diversity promotes a better understanding for the m arket place, increases creativity and innovation, produces mores effective problem solving, enhances the effectiveness of corporate leadership, and promotes effective global relationships (Robinson and Dechant, 1997). Fondas and Sassalos, 2000 argue that diversity in board composition via greater female representation will lead to improved board governance and top management control. In microfinance, the study of Coleman, 2006 show that having women in CEOs on MFI boards enhance performance and also the more the women there are on a board, the better the performance. Furthermore, having a high fraction of women in the board would help the MFI understand its customers better so as to separate the good risk from the bad (Mersland R. et Oystein Strom R. 2007). Hypothesis 4. Board diversification and the presence of women and minority will lead to a better performance of MFI. Another principle of effective bank supervision is effective internal audit. Internal audit helps to ident ify problem areas and to avoid major collapse. The internal board auditor provides independent, objective assessments on the appropriateness of the organizationà ¢Ã¢â€š ¬Ã¢â€ž ¢s internal governance structure and the operating effectiveness of specific governance activities. Reporting of all internal audit reports in an accurate and timely manner is essential for evaluation of the institutionà ¢Ã¢â€š ¬Ã¢â€ž ¢s status and need for any change in strategy. Policy papers for MFIs stress the importance of internal audit and recommend that the internal auditor reports directly to the MFI board (Steinwand, 2000). Hypothesis 5. MFI allowing their internal auditors to report directly to the board should show higher financial performance. 4.2. External Governance Mechanisms The external governance mechanism can be implemented as a result of the failure or the weakness of internal governance mechanisms. In the microfinance industry donors and creditors are increasingly relying on information from audited financial statement and rating agencies (Hartarska, 2005). These external governance mechanisms are an important mechanism that provides depositors, creditors and shareholders with credible assurances that they will refrain from fraudulent activities. In other words it reduces informational asymmetries between the different stakeholders and the firm (Healy Palepu, 2001). Audited financial statements are an important tool for the assessment of MFIs by regulators and capital markets. They form an important part of the effective corporate governance. The auditorà ¢Ã¢â€š ¬Ã¢â€ž ¢s role is to provide a disinterested an objective view of the financial statements of the MFI in the line with generally accepted accounting standards. It is a mean to ensure potential investors and donors that an MFI complies with the accounting practices and managers do not misrepresent financial information. Hypothesis 6. MFIs with financial statement audited achieve better performance than MFIs without financial statement audited. According to Hartarska (2005), in the absence of developed equity and debt market, donors and investors rely on independent evaluation of MFIs performance. A MFIs rating reflects a rating agencyà ¢Ã¢â€š ¬Ã¢â€ž ¢s opinion of entityà ¢Ã¢â€š ¬Ã¢â€ž ¢s overall creditworthiness and its capacity to satisfy its financial obligations. The raters evaluate objectively and independently the corporate governance in MFI and rank it on a relative rating scale that would facilitate comparison. Unlike typical rating agencies that rate the riskiness of issued debt, microfinance rating agencies rate the overall performance of the MFI in terms of outreach and sustainability. Hypothesis 7. Rating helps MFIs to achieve better results Many MFIs around the world operating as NGOs have increased their assets, reorganized, and transformed into regulated entities that can capture savings deposits. A regulated MFI has more chance to earn customer trust, and by the way to have a higher financial performance. Hence, regulation is crucial for microfinance sector development since it affect MFI performance by changing the internal rule of the organization. It implies the access to an important and low-cost funding source through the right to mobilise savings. Due to this effect, the MFI win the opportunity to increase the number of clients, but also to increase average loan amounts for existing borrowers. Moreover, if demands to fulfill regulatory requirements divert attention away from serving the poor, and hold back innovation in lending technology that has been the driving force behind MFIsà ¢Ã¢â€š ¬Ã¢â€ž ¢ability to serve even poorer borrowers, regulatory involvement will lead to mission-drift (Hartarska, 2007). Therefore, the effects upon depth and breadth in outreach may be uncertain as well, either upon depth or breadth, or a combination of the two (Mersland R. Oystein Strom R. 2007). Hypothesis 8. Regulation may guide the MFIs to fulfill better sustainability, but not to achieve better outreach. 5. Data and methodological issues Data for this study are issued from various sources. The major part comes from a survey conducted by the author in 2006 in order to test the efficiency of microfinance institution in Mediterranean (Ben Soltane, 2008). The performance variables and some governance variables are also obtained from the annual financial reports of the microfinance institutions collected from Microfinance Information Exchange (MIX); a non governmental organization whose object is to promote the exchange of information on the microfinance sector around the world  [4]  . All these information are updated and completed by a questionnaire dealing fundamentally with detailed question on governance addressed to the MFIs in the region. The response rate was 58% with 40 institutions. A special questionnaire was also addressed to the Mediterranean microfinance institutions that donà ¢Ã¢â€š ¬Ã¢â€ž ¢t figure in the MIX MARKET data base. The response rate for these MFIs was weak and near 20%, with four inst itutions. Due to missed data, only two institutions are taken into account. The final sample comprises 42 institutions working in 20 countries. Our sample is quite representative of the Mediterranean microfinance industry as well as of the governance mechanisms and the performance of MFIs in the region. Following Hartarska (2005) works, our empirical model used to test the hypothesis include five major potential groups of determinants and is on the form: Where is a performance variable for MFI i in country j at time t; are MFI specific variables; are management specific variables; are board-specific variables, are external governance mechanisms; and are the country-specific macroeconomic variables. It is crucial to mention at this level that our choice of a single-equation model is supported by the hypothesis that various governance mechanisms are endogenously determined is not always supported by empirical evidence  [5]  . Since MFIs are special institutions having a d ual mission, their performance is measured in terms of outreach and sustainability. Outreach is measured in breath and depth. Breach of outreach (NAB) is the logarithm of active borrowers, depth of outreach (DEPTH  [6]  ), is the average loan size on GDP per capita. Sustainability is measured by return on assets (ROA) which is a standard finance literature measure of performance, and by operational self-sufficiency (OSS). This variable measures how well the MFI can cover its costs through operating revenues. Table 1. Definitions of dependent variables used in analyses Variable Explanation Social Performance: Outreach NAB Logarithm of the number of current borrowers DEPTH The average loan size on GDP per capita Financial Performance: Sustainability ROA Return On Assets OSS Operational Self-Sufficiency MFI specific variables () are MFI size measured by the logarithm of total assets, MFI age measured in years sine commencement, and MFI type measured by th ree dummies (NGO, Nonbank Financial Institution, and bank). Since further studies (Navagas, Conning, Gonzalez-vega, 2003) show that the type of lending methodology used influences the success of these organization, our study include a variable Individual which is a dummy that takes the value of one if the MFI used individual lending technology. Variables built-in are Fixed-wage, which is a dummy for pay not based on performance, Experience is used to proxy for a mangerà ¢Ã¢â€š ¬Ã¢â€ž ¢s quality and is measured by the years of work experience. The board-specific variables contains Board-size, measured by the number of board members; Employees measured as the proportion of MFI employees who are voting board members; Independent measured as the proportion of non-affiliated board members; Women measured as the proportion of women in the board; Internal Board Auditor is a dummy variable that takes the value of one if there was an internal auditor with direct access to the board. The variables included in are Regulation, which is a dummy that takes the value of one if the MFI was supervised by the central bank or other bank supervisory agency; Rated is a variable that indicates whether the MFI was subject to independent evaluation or rating by an outside organization; Audited is a dummy that take also the value of one if there was an audited financial statement in the year t-1. Since MFI are issued from north and south of the Mediterranean, the dissimilarity in economic conditions across countries are controlled by the size of the economy (Economy size), measured by the logarithm of a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s GDP, and by the average inflation rate (Inflation), measured by the average consumer price index. These variables are issued from the World Bank Development Indicators. We wanted also to build a variable that take account of the institutional differences between countries but we did not find an adequate measure. Table 2. Definitions of independe nt variables used in analyses Variable Explanation Fixed-wage A dummy being one if the manager receives a fixed salary Experience The number of years of experience of the manager Board-size Number of board members Independent The proportion of voting board members who do not have an affiliation with any of the stakeholders of the MFI Women The proportion of the women in the board Internal board auditor A dummy being one if internal board auditor reports directly to the board Audited A dummy that equals one if the financial statement of the MFI is audited and zero otherwise Rated A dummy that equals one if the MFI is rated by a specialized MFI rating agency and zero otherwise Regulation A dummy being one if the MFI is regulated by banking authorities Individual A dummy that equals one if the MFI used individual lending methodology and zero otherwise MFI age Number of year sine the commencement MFI size Loga rithm of the total assets of the MFI NGO The MFI is an NGO NBFI The MFI is an non financial bank institution Bank The MFI is an bank Inflation Average annualized consumer price index Economy size Logarithm of total GDP (Gross Domestic Product of the country) for year t 6. Discussion of findings Table 3. Descriptive statistics (N=42) Variable Mean Standard Deviation Min Max ROA 5.935 23.12 -7. 58 33 OSS 85.41 63.2 20.345 143.33 NAB 8.238 45.11 2.34 45.23 DEPTH 220 143 111 654 Fixed-wage 0.824 0.578 0 1 Experience 8.4 16.12 2 11 Board-size 5.82 3.32 4 16 Independent 0.457 0.245 0 0.213 Women 0.398 0.367 0 0.453 Internal board auditor 0.478 0.532 0 1 Audited 0.812 0.634 0 1 Rated 0.376 0.512 0 1 Regulation 0.423 0.675 0 1 Individual 0.732 0.479 0 1 MFI age 3.254 2.349 4 17 MFI size 17.634 2.115 7.311 23.546 NGO 0.598 0.463 NBFI 0.178 0.234 Bank 0.098 0.127 Inflation 0.164 0.254 0.023 0.328 Economy size 19.34 2.278 12.432 34.897 Source: Authorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ estimates The descriptive statistics for this study are shown in table 3. Notably, we have complete records of data for only 42 institutions. The performances of Microfinance Institutions are widely spread. On the average, the MFIs recorded a return on assets of 5,935%. While the minimum was -7.58%, the maximum performance was 33% indicating a widely spread performance. Similarly, the studied MFIs have on the average an Operational Self-Sufficiency of 85.41% with respectively a minimum and a maximum of 20.345% and 143.33%. As regard to the DEPTH, the average value relatively weak 220 indicate that the poor borrowers are very well served On the average, the MFIs managers have 8.4 years of experience and 82.4% of these managers are receiving a Fixed-wage. On the average, 5 persons serve on a board of an MFI and a standard deviation of 3,32 cou pled with a maximum board size of 16 members and a minimum board size of 4 members suggest that these boards are widely dispersed. The unaffiliated directors represent on the average 45% of the board members. The descriptive statistics indicate also that on the average 39% of all boards are made up of women. In our sample, around half of the MFI have an internal auditor reporting directly to the board. Moreover, 81% of the MFIs studied have their financial statement audited and 37% of the MFIs forming the sample are rated. The result also shows that 42% of the institutions are regulated, and the individual lending technology constitutes 73% of the cases. The average age standing for the MFI is about 3 years. The NGO represent 59% of our sample however, the NBFI and Bank represent respectively 17% and 9% of the sample. Finally, the average inflation rate in all the countries subject of the study is about 16%. Table 4. Regression Results of sustainability and outreach Sustain ability Outreach ROA OSS NAB DEPTH Fixed-wage 2.76 (0,23) 1.38 (1,02) -0,157 (-0,47) -0,356 (-0,36) Experience 0.09 (0.044) 1.528 (9.72)*** 0.064 (2.65)*** -0.024 (3.22)*** Board-size 0,1927 (4,23)** 0,1923 (4,23)** 0.079 (2.74)*** -0.028 (0.61) Independent 0.081 (2.21)** 0.044** (1.54) 1.528 0.034 -0.029 (1.93)* Women 0,234 (2,18) 0.081 (3.18) 1,224** (0,09) -0,567** (1,11) Internal board auditor 0.94 (1.21) 0.061 (0.42) 2.34 (2.43) 0.34 (0.09) Audit 1.919*** (0.203) 0.006** (0.009) 0.003 (0.002) -0.182 (0.187) Rating 0.006 (0.009) 0.033 (0.132) 0.138 (0.071) -0.212 (0.192) Regulation 0.776*** (0.161) 0.002** (0.013) -0.013 (0.054) 0.008 (0.013) Individual 0.348*** (0.075) 0.009 (0.143) 0.024 (0.055) -0.0 61 (0.055) MFI age 0.174** (0.152) 0.168** (0.072) 0.002*** (0.013) -0.018** (0.137) MFI size 0.033* (0.132) 0,234** (4.32) 0.012** (0. 13) -0.125* (0.432) NGO -0.001 (0.004) -0.109 (0.084) 0.003** (0.005) -0.003*** (0.005) NBFI 0.059 (0.013) 0.417 (0.187) 0.003 (0.009) -0.278 (0.162) Bank 0.19 (0.124) 0.271 (0.238) 0.102 (0.076) 0.023 (0.301) Inflation -0.196** (0.025) -0.020** (0.009) -11.915 (1.814) -0.306 (0.059) Economy size -0.028 (0.008) 0.148 (0.172) 0.007** (0.002) -0.006** (0.002) Constant -3,2708** (-3,33) -3,2268** (-3,31) 0.2789 (2.11) 0,2962** (2,09) Number of observations 42 42 42 42 Wald Statistics 79.23 83.34 92.12 89.37 Log pseudo-likelihood -168.93505 -146.57205 -123.87643 -178.34896 Pseudo R2 42 42 42 42 Absolute value of t-statistics in parentheses *Significant at 10% level, ** Significant at 5% level, *** Significant at 1% level As can be shown in table 4 dealing with the estimation of the impact on sustainability and outreach, our first hypothesis stipulating that the remuneration system (performance-based compensation or fixed salary) is confirmed. The coefficient on Fixed-wage is not significant in any of the specifications. This result confirms formers findings, such as Hartarska (2005) and can be attributed to the fact that MFIs managers may not have reacted to performance-based compensation offered during the study period. Managerial qualifications as shown by the positive and significant sign of Experience in the OSS and NAB regressions as well as the enviable negative and significant coefficient in the DEPTH indicate that the acquired experience allows MFIs managers to reach poor borrowers and produce better sustainability. Board size is rath er positively related to ROA, OSS, and NAB suggesting in the contrary that MFIs with larger boards seems to do better. The results reduplicate our second hypothesis and confirm studies that support the view that larger boards are better for corporate performance since members have a range of expertise to help to make better decision, and are harder for powerful CEO to dominate. This is in sharp contrast to finding by Jensen (1993), Lipton Lorsch (1992), Eisenberg et al., (1998), and Sanda et al., (2003); however, it confirm the finding of Kyereboah-Coleman, A, (2006). An important result of this study is the support for the third hypothesis that MFIs with a higher proportion of unaffiliated directors had better sustainability (ROA OSS) and also reach poor borrowers. This result confirm previous works: Hartarska (2005), and indicate that MFIs can also benefit from more independent boards. The results of the study confirm partially the fourth hypothesis and show that board div ersity (Higher proportion of women) improves social performance. This is consistent with recent thinking and discussions which point to the fact that governance reforms have been geared towards the importance of gender diversity especially in the boardroom and that the issue of gender diversity is central and could enhance boards effectiveness by tapping boarder talent pools for their directors resulting in more diverse board having better relations with other stakeholders such as customers, suppliers, and employees (Ellis and Key, 2003) which inevitably translate into performance and firm value (Kyereboah-Coleman, A, 2006). Our fifth hypothesis is not confirmed by the empirical results. Although the internal auditor reporting to the board is way to reach board governance with information relative to internal firm governance, the results indicate that the internal board editor seems not to have any significant influence on MFIs performance. A similar result was found by Mersland R. Oystein Strom R. (2007). Although microfinance rating agencies rate the overall performance of the MFIs in terms of outreach and sustainability, the empirical results show that this variable havenà ¢Ã¢â€š ¬Ã¢â€ž ¢t any significant influence on MFIs performance. In addition, the study reveals that MFIs having their financial statement audited achieve better sustainability. These MFIs complies with accounting practices and are able to reach higher levels of financial performance. Regulated MFIs do not reach more borrowers but according to results from table 4, have significant and positive ROA OSS. Although this result is diverse from past studies which did not find any relation between these two dimensions: Mersland R. Oystein Strom R. (2007), or find a weak relation: Hartarska (2005), it bring the evidence that regulation may assure customers that they are treated fairly and this could lead to more business and better financial performance. Results indicate that the lending technology improve considerably the financial performance of the MFIs. This result can be attributed to the fact that the cost argument is more important than the repayment argument for group lending or village bank. The supposed efficiency in group lending does not hold Mersland R. Oystein Strom R. (2007). From another point of view, it can be justified by the new tendency toward the individual microlending (Armendariz de Aghion and Morduch, 2005; Ben Soltane and Trigui, 2008), since this methodology becomes highly recommended (Armendariz de Aghion and Morduch, 2000). This study confirms well the study of Cull et al. (2007). In conformity with the theory and formers studies such as Kyereboah-Coleman, A, (2006), the age of the firm as a proxy for reputation impact positively on performance likewise the size of the MFI. Expectedly, the size of MFI has a significant positive impact on performance. This may be due to the fact that a large firm has the ability to accommodate risk and to enhance productivity through diversification of products and services. The study shows that NGOs are more efficient than NBFI and show better social performance by reaching the poor. It becomes clear that NGOs are more consistent with their social mission than with their financial performance. The results reveal also the significance of controlling for crosscountry differences. The level of inflation affects negatively the sustainability of MFIs. Comparable results were found by Hartarska (2005), in Central and Eastern Europe and the Newly Independent States. Finally, the study suggests that economy of big size affect outreach. 7. Conclusion and recommendations This paper tests empirically the relationship between corporate governance and Euro-Mediterranean MFIs performance in terms of outreach and sustainability. While using data from a self-conducted survey as well as from the annual financial reports and from the Mix Market, the study examine the impact of management remuneration, board independence and diversity, internal auditor reporting directly to the board, external governance mechanisms of control, and MFIs and countries specifications. Results indicate that not all known governance mechanisms affect performance and in addition, different factors have differential effect on outreach and sustainability. The study shows that explicit and implicit incentives schemes such as compensation, perks, etc become less powerful and less able to motivate managers (Dewatripont, Jewitt Tirole, 1999). Results show also that larger boards are better for MFIs performance since members have a range of expertise to help to make better decision and are harder for powerful CEO to dominate. Moreover the study reveals that microfinance boards with larger proportions of unaffiliated directors achieve better results. Thus, independence of the microfinance board should be encouraged. The fundamental result of this study is that board diversity (Higher proportion of women) enhances performance and again the more women there are on a board, the better the performance. Thus board diversity is paramount for enhanced performance of microfinance institution. Having financial statement audited, and being rated by international agencies is synonym to a better financial performance. It seems that external governance mechanisms help MFIs to reach their financial performance. This study allows us to distinguish other factors leading also to a better sustainability such as Regulation and the use of individual lending methodology. However, the MFIs type (NGOs) seems to be more consistent with their social mission than with their financ ial performance. The microfinance institutions characteristics such as age and size affect positively the performance nevertheless, the level of inflation have a negative impact on the sustainability of MFIs. Although this study bring some clarifications on the link between governance mechanisms and performance in microfinance, several governance mechanisms remains unexplored such as CEO duality, graduate board members, international directors, ownership structure. Thus, it seems relevant to conduct more studies in order to learn more about the impact of these governance mechanisms on outreach and sustainability of MFIs not only in the Euro-Mediterranean countries but also in other part of world.