Board Sub-Committees

Specifically for Micro Finance Institutions

 Need of Sub-committees
 Types of Sub-committees
 Scope of Sub-committees
 How it Works?
 “The majority of board work takes place
between meetings, both through
committees and during informal exchanges,
especially between the chair and CEO.”
Why We Need Sub-Committees

 Smaller group is more efficient than full board

 Focussed deliberation to specific matters of
concern
 Contribution from individuals with specific talent
and expertise
 Serve as training grounds
 Responsibility sharing
What Sub-Committees Do?

Improve the quality and Focus on assigned task in time-

efficiency of Board bound manner

It never makes a policy decision to full

board

Recommendations to full board Give suggestions to full board

 “For committees to be effective, their
work, role, responsibilities, and mandates
must be clearly outlined.”
Types of Committees

 Executive Committee
 Internal Audit Committee
 Risk Management Committee
 Loan/Credit Committee
 Social Performance Committee
 Asset, Liability Committee (ALCO)
 Human Resources Committees
 Executive Committee
 Function:
Its scope covers all major functions of MFI
 Composition:
 Chair,
 Managing Director, and
 two to four others
 Responsibilities:
 Discusses issues and agenda in preparation for board meetings
 Establish initial level consensus on difficult issues that the
board must address
 Make decisions and address policy issues that the board has
delegated to it
 Play a key role in directing the activities, discussions and
decisions of a board
 Internal Audit Committee
 Function:
The primary audit function of the Committee is to assist the
Board in fulfilling its oversight responsibility by reviewing the
institution’s financial operational resources; Internal control
policies; all audit processes; and compliance with laws,
regulations and policies that may apply.

 Composition:
Two or three directors with strong financial skills and
possibly the finance manager or internal controller.
Internal Audit Committee
Continued….
Responsibilities
 Choosing the auditing firm; define range of audit; and
consult with the auditors on audit plan
 Review the procedures and results for internal audit
and control
 Consult with independent auditors regarding adequacy
of internal controls
 Review annual and quarterly financial statements
 Make recommendations to board on resolutions related
to its activities
 Risk Management Committee

 Function:
The purpose of the risk management committee is to assist the
Board in fulfilling its obligations and responsibilities for managing
Risk.
 Composition:
There is no set criteria, although preference given to Financial and
Compliance experts. At least a team of three.
Responsibilities:
 Monitoring and controlling practices related risks inherent to
the institution as per the risk management program which was
designated and documented in the institution.
 Oversee reports and make recommendations to the Board in
respect of financial and non-financial risks faced by the
institution.
Loan/Credit Committee
 Function:
The purpose of the committee is to assist the Board in
fulfilling its obligations and responsibilities for monitoring
portfolio quality and compliance with credit policies and
applicable regulations.

 Composition:
 Managing Director and
 Three or four board members
Loan/Credit Committee
Continued….
Responsibilities
 Ensure lending policies are adequate
 Ensure lending activities follow institutional policy as well as
applicable laws and regulations
 Monitor loan portfolio quality, recognize adverse trends, and
ensure appropriate corrective action is taken
 Set provision and write-off policy and ensure reserves are
adequate
 Evaluate credit applications and make credit decisions for
larger loans, beyond the authorized limit of executive
management
 Approving the institution’s credit policies.
 It has the authority to assign standards for credit officers’ loan
authority, credit mix, and write off approval for bad loans.
 Verify the integrity of the loan portfolio and the adherence to
the institution’s credit policies.
Social Performance Committee
 As one way to ensure that social
mission is incorporated into the Define and
Monitor Social
governance process, the Board Goals

can designate Social Ensure Board,

Balance Financial Management, and
Performance management (SPM) and Social
Performance
Employee
Commitment to
Committee to regularly oversee Social Goals

and report on the process of Universal

Standards For
integrating social aspects into Social
Performance
Management
its overall processes. Design Products,
Services, Delivery
 Likewise, it can regularly report Treat Employees
Responsibly
Models, Channels
That Meet The
Clients' Needs and
to the Board on whether the MFI Preferences

is meeting its social objectives Treat Clients

and fulfilling its mission. Responsibly
 Asset
Liability
Committee (ALCO)
 Function:
Its scope includes monitoring of balance sheet management
to ensure appropriate levels of liquidity, maximum earnings
on securities, and appropriate management of interest rates
and currency exchange risks.

 Composition:
 Managing Director,
 Finance Director,
 Two or Three Board members who are not internal directors
Asset, Liability Committee
Continued….

Responsibilities
 Ensure regulatory requirement on liquidity are met
 Oversee cash flow procedures to ensure they are
implemented and effective
 Guard against inadequate or excess liquidity.
 Monitors securities portfolio and its activities
 Ensure appropriate diversification and compliance with
corporate policy
 Monitor interest rate sensitivity and term matching of
balance sheet
 Monitor exchange rate exposures
 Human
Resources
Committee
 Functions:
It oversees human resource management and develop personnel
policies for senior management
 Composition:
 Two or three directors
 MD and
 HR Head
Responsibilities
 Recommend compensation for senior management, officers
and directors to the full board, including stock options etc.
 Provide oversight for personnel matters
 Supervise orientation and ongoing development of board
members
 How It Works?

 Committees are the workhorses of the board.

 Committees should meet before formal board meetings and

report their progress and findings to the board in an oral
report at board meetings, supported by minutes of the
committee meetings.

 If a committee is seeking a decision from the board, the

committee chair should arrange adequate time on the
agenda through the board chair and have the necessary
information circulated to the board in advance.
Thank You