The regional logic of inclusive governance: gender diversity, board independence, and MFI performance in the Arab world

Purpose This paper investigates how board gender diversity moderates the relationship between board independence and the financial performance of Microfinance Institutions (MFIs) in the Arab world, with explicit attention to the contingent role of subregional institutional logics. Challenging the assumption of regional homogeneity, this study examines why this governance synergy succeeds in some contexts but not others across four institutionally distinct subregions: the Maghreb, Nile Valley, Mashreq/Levant, and Gulf. Design/methodology/approach Using a balanced panel of 84 MFIs from 10 Arab countries over 2006–2019 (1,176 firm-year observations), fixed-effects regression models are estimated with robust standard errors clustered at the MFI level. Financial performance is measured by Return on Assets and Return on Equity. Gender diversity is captured via Blau's and Shannon's indices, while macroeconomic and institutional controls are included to isolate governance effects. Findings Board independence positively influences MFI performance. Crucially, the effect of board independence on performance is significantly strengthened by gender diversity, but only in subregions where socio-cultural norms and legal frameworks support substantive female participation. This moderating effect is robust and statistically significant in the Maghreb (Tunisia, Morocco, Algeria) and partially in the Mashreq/Levant (Jordan, Lebanon), yet absent or weak in the Nile Valley (Egypt, Sudan) and the Gulf (Saudi Arabia, UAE, Bahrain). Macroeconomic stability further emerges as a critical enabler of financial sustainability. Practical implications The results caution against universalist gender quotas in governance. In inclusive environments, gender diversity acts as a performance multiplier for independent oversight; in resistant contexts, it risks remaining symbolic. Policymakers and MFI leaders must therefore couple board composition reforms with deeper institutional and cultural changes to unlock the developmental potential of inclusive governance. Originality/value This study advances development economics by demonstrating that the value of gender diversity as a governance enhancer is not intrinsic but regionally contingent. It introduces the concept of a “regional logic of inclusion,” showing how the interaction between governance mechanisms is embedded in, and amplified by, local institutional ecosystems. In doing so, it bridges agency theory with institutional analysis to offer a more nuanced understanding of effective governance in emerging economies.