Remarks by Timothy Lyman

….[M]ost of the operating MFI's that we see on the continent are going to fall into one of…three broad groups. Let's start with the ownerless NGO MFI's. Possible legal forms and the names that they're called vary dramatically from legal system to legal system, but the emphasis here is that these are essentially ownerless legal vehicles. And that's extremely important in terms of their treatment and their operation. In some legal systems, they can be called something that is a little bit confusing, "nonprofit companies", "companies limited by guarantee", as we've seen here in Jordan. Under Jordanian law, for example, you can have both something that's called an NGO and something different that's called a nonprofit company. But what's the same is that in both cases, these are ownerless vehicles because there's no power to distribute net profits to members. This non-distribution principle is what makes them very different from member owned co-ops and shareholder owned commercial companies.

Now, let's have a look at the member-owned financial cooperatives. Again, …the different legal forms and the names by which they go vary from legal system to legal system. But what the emphasis is on here is that they're member-owned and also usually member-governed. The economic interests of their members makes them very different from NGOs, even those NGOs that have members. Also, the cooperative legal form typically differs from shareholder ownership because they're member-owned and because of the so-called, one member, one vote principle.

Finally, shareholder-owned commercial companies, again, here the different legal forms and the names by which they go vary very dramatically from legal system to legal system. So all of these are entities that have one or more of classes of economically interested owners, usually referred to as shareholders, but sometimes also going by other names. Unlike a cooperative, in the case of a shareholder-owned company, governance is typically proportional to the ownership interests. And this is very important because it makes them critically distinct…from the member-owned MFI.

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