Microfinance Institutions' Mission Drift in Macroeconomic Context

Recent evidence shows that MFI financing continues to evolve with an increased inclination towards commercial financing. Taking stock on MFI financing and refocusing on the relationship between financing options and financial sustainability (FS) is unavoidable. The authors consummated a literature review based on complementing the little evidence on the subject with both theoretical and implied evidence from related studies in unpacking the relationship. Though donations are losing grip as a popular MFI financing option, review of literature recommends smart subsidies to spur FS and counter inefficiency, mis-targetting, dependency and distortions. As much as debt addresses agency problems and endorses FS, it has to be kept within limits to curb liquidation and mission drift. Deposit attraction augments FS and outreach, though MFIs must prepare to foot licensing costs, otherwise, mission drift ensues. Equity, though scarce in microfinance, is cheap and additive to FS. The authors suggest that MFIs should consider commercial funding, whilst keeping a check on the downside of each commercial financing option to augment FS and multiply outreach

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Cross-Border Funding and Microfinance Mission Drift: Evidence from Sub-Saharan Africa

10.51240/jibe.2016.2.3 ◽

2016 ◽

Vol 17 (2) ◽

pp. 20-40

Author(s):

Akem Forkusam

Keyword(s):

Sub Saharan Africa ◽

Microfinance Institutions ◽

Public And Private ◽

Mission Drift ◽

Cross Border ◽

The Social ◽

Sub Saharan ◽

The Impact ◽

Different Sources ◽

Ssa Countries

Sub-Saharan Africa (SSA) has become the top priority for international funders and they are now increasing their cross-border funding to microfinance institutions (MFIs) in the region. This foreign funding is considered an additional source of capital for MFIs in the region who are facing difficulties in meeting the demand of the poor. However, these funds are provided by public and private funders who each have different motives. The paper examines the impact of these different sources of funding on microfinance performance and mission drift in SSA, which is the world’s poorest region. The study utilizes data from 212 MFIs in 30 SSA countries accessed over a three-year period (i.e. 2007, 2009, and 2011). The findings show that cross-border funding does not affect either the social or financial performance of MFIs when time and country effects are accounted for.

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Mission drift and ethical crisis in microfinance institutions: What matters?

Journal of Cleaner Production ◽

10.1016/j.jclepro.2017.06.176 ◽

2017 ◽

Vol 164 ◽

pp. 102-114 ◽

Cited By ~ 23

Author(s):

Md Aslam Mia ◽

Hwok-Aun Lee

Keyword(s):

Microfinance Institutions ◽

Mission Drift ◽

What Matters

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Financial efficiency versus social outreach of Indian microfinance institutions: mission drift or character shift?

Journal of Social and Economic Development ◽

10.1007/s40847-018-0049-3 ◽

2017 ◽

Vol 19 (2) ◽

pp. 323-340 ◽

Cited By ~ 2

Author(s):

Lalitagauri Kulkarni

Keyword(s):

Microfinance Institutions ◽

Financial Efficiency ◽

Mission Drift ◽

Social Outreach

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Sustainability and Mission Drift: Do Microfinance Institutions in Vietnam Reach the Poor?

Microfinance Institutions ◽

10.1057/9781137399663_6 ◽

2014 ◽

pp. 99-118 ◽

Cited By ~ 1

Author(s):

Sarath Abeysekera ◽

Umut Oguzoglu ◽

Thanh Tam Le

Keyword(s):

Microfinance Institutions ◽

Mission Drift ◽

The Poor

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Aid Volatility and Social Performance in Microfinance

Nonprofit and Voluntary Sector Quarterly ◽

10.1177/0899764016639670 ◽

2016 ◽

Vol 46 (1) ◽

pp. 116-140 ◽

Cited By ~ 16

Author(s):

Bert D’Espallier ◽

Marek Hudon ◽

Ariane Szafarz

Keyword(s):

Interest Rates ◽

Social Performance ◽

Microfinance Institutions ◽

Mission Drift ◽

Social Mission ◽

Signaling Device ◽

Adjustment Variable ◽

Donor Agencies ◽

Loan Size ◽

Policy Prescription

Uncertainty makes objectives harder to reach. This article examines whether uncertainty in subsidies leads to mission drift in microfinance institutions (MFIs). Using a worldwide sample of 1,151 MFIs active in 104 countries, we find that interest rates increase with aid volatility while average loan size (ALS) is inversely related to aid volatility. These results suggest that MFIs consider ALS as a signaling device for commitment to their social mission, but use interest rates as an adjustment variable to cope with uncertainty. The policy prescription to donor agencies wishing to curtail the rise in interest rates is to deliver subsidies predictably and transparently.

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