Stemming the Tide of Mission Drift: Microfinance Transformations and the Double Bottom Line (Draft)

Publication Date: 17 Apr 2008
Published by: Women's World Banking (WWB)
Document Type: Paper

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Is the influx of private capital into microfinance causing mission drift?

This paper provides an overview of the process by which MFIs transform from NGOs into Rural Financial Institutions (RFIs). It examines the impact of the transformation process upon a control group of approximately 25 MFIs that Women’s World Banking has been tracking since 2000. The paper finds that transformation:

• Results in increased client outreach and accelerated growth in total loan portfolio;
• Results in product diversification—particularly with respect to the mobilization of client savings;
• Tends to result in higher average loan sizes for RFIs than NGO MFIs;
• Allows MFIs to serve more women clients, but the percentage of women clients being served declines.

Further, it lists out experiences of microfinance practitioners with the transformation process across following aspects:

• Maintaining the mission post-transformation;
• Staying committed to women, while managing growth through transformation;
• Focus on women clients and resources.

The paper concludes that transformation is a central component of the commercialization trend in microfinance. However, the industry needs to remain alert to the potential for mission drift, and ensure that the movement towards larger and more profitable loans does not come at the expense of low-income entrepreneurs that have formed the core of the industry.