NGO MFI Transformations: Ownership Issues

November, 2008     Kate Lauer

More and more nonprofit microfinance institutions (NGO MFIs) are transforming into for-profit companies, including regulated financial institutions. Transformations are typically driven by one or more of the following factors: an MFI’s need for capital, its desire to offer services that may be limited to regulated financial institutions (such as savings), and new legislation or regulation requiring or permitting transformation.

Transformations raise a host of issues that NGOs and their founders and funders need to address. The complicated issues involved in switching from an ownerless entity to an entity with owners often are not well understood before the transformation process is initiated. This brief reviews seven areas in which those embarking on a transformation should research and seek legal counsel’s advice. These areas and others are discussed in depth in Lauer (2008).

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