The concept of governance which has been discussed in the field of microfinance, it is distinguished as corporate governance in existing literatures by several scholars and researchers.

According to OECD (1999), corporate governance is typically defined as a system, or a set of mechanisms, by which an organization is directed and controlled.

In relation to MFIs, corporate governance is defined as “a process that involves a system of check and balances between owners and other stake holders who set the standard and objectives of accountability of a given institution; leadership and commitment to ensure fulfillment of the institutionʼs mission and protection of its assets over time; and guidance by the board of directors, the governance is under the direction of the board” (Rock, Otero and Saltzman, 1998: p. 1).

Corporate governance is therefore, a process through which a board of directors, guides an institution in fulfilling its corporate mission and protects the institution’s assets over time. Individual directors have to work in partnership to balance strategic and operational responsibilities (Rock, Oter o and Saltzman, 1998).

Defending the organization’s mission, vision and fundamental goals.

Moving the organization along its main strategic guidelines.

Maintaining the organization’s long-term sustainability.

Ensuring that corporate responsibility is applied throughout the organization.

Corporate governance in microfinance is about assuring the long-term survival of service providers without them losing track of their missions. Some financial institutions have experienced major crises, showing the great importance of controlling institutional development. So the corporate governance debate comes to find the critical question of impact, efficiency and the ethics of microfinance. As microfinance gets the popularity and other issues emerge regarding financial backgrounds of microfinance institutions, the wide variety of roots and many different stakeholders, with their often competing interests and competences, together form one of the reasons why corporate governance in microfinance is an interesting area, but it remains demanding in terms of formulating public policy.

It is not certain that every microfinance institution has corporate objective. With different backgrounds and objectives, it is difficult to encourage the effective financial sustainability and outreach of MFIs through corporate governance. (Kayastha 2013)

Microfinance is practiced by a wide variety of organizations, not all of whom have the same priorities. MFIs are not only different in terms of their organizational forms, but also different in terms of products, methodologies, social priorities and profit seeking behavior, and historical roots (Mersland, 2009)