Microfinance Gateway>Stemming the Tide of Mission Drift: Microfinance Transformations and the Double Bottom Line

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Stemming the Tide of Mission Drift: Microfinance Transformations and the Double Bottom Line
17 Apr 2008, Frank, C., Lynch, E. & Schneider-Moretto, L.

Examining whether commercialization is promoting mission drift among MFIs and impacting women clients negatively

This paper examines the impact of the transformation process upon a control group of approximately 25 MFIs that Women’s World Banking (WWB) has been tracking since 2000. The study originates from WWB's concern that the influx of private capital into the microfinance industry may be causing mission drift, thereby diluting the poverty-alleviation focus of transformed MFIs in the face of increased pressure to generate profits.

The study's analysis focuses on both the financial and non-financial trends, including client and portfolio growth, average loan sizes, profitability, savings mobilization and shareholding structure - that emerged when a select set of transformed MFIs were compared against a similar set of non-transformed, NGO MFIs.

The study findings reaffirm the prevailing notion that microfinance transformations tend to catalyze growth in MFI outreach and product offerings. However, consistent with WWB's focus on the financial needs of low-income women entrepreneurs and their families, this paper highlights:

Trends affecting outreach to women clients in transformed institutions, in particular, the significant decline in the percentage of women clients served by formalized MFIs after transformation;
Interviews with MFI practitioners on the topic of transformation;
Innovative strategies that WWB and its network members are undertaking to ensure that women clients receive high-quality financial services from formalized as well as NGO microfinance providers.

Finally, through this paper WWB hopes to provoke discussion in the microfinance industry about ways to avert this trend so that future MFI transformations will enhance, rather than curtail, outreach to women clients.

[Adapted from authors]

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Publisher(s):
Women's World Banking