The promise and peril of microfinance commercialization
Microfinance has entered a new phase in which competition and other market forces are compelling microfinance institutions to adopt 'commercial' approaches. Commercialization holds out several promises;chief among them are the benefits for microfinance consumers that typically accompany competition and, for transformed MFIs, the ability to mobilize small-scale savings. But it also poses several perils
of which mission drift is the most prominent. This article reviews the promises and perils of commercialization and the evidence for mission drift. It concludes that the promises of commercialization more
than justify its risks, but it cautions restraint and recommends a continued role for poverty-focused microfinance NGOs so as to ensure that the poor, and especially the very poor, remain legitimate markets
for financial services.
chief among them are the benefits for microfinance consumers that typically accompany competition and, for transformed MFIs, the ability to mobilize small-scale savings. But it also poses several perils
of which mission drift is the most prominent. This article reviews the promises and perils of commercialization and the evidence for mission drift. It concludes that the promises of commercialization more
than justify its risks, but it cautions restraint and recommends a continued role for poverty-focused microfinance NGOs so as to ensure that the poor, and especially the very poor, remain legitimate markets
for financial services.
Does Commercial Microfinance Belong to the Financial Sector? Lessons from the Stock Market
Brière, Marie
Szafarz, Ariane
World Development, Vol. 67 (2015), Iss. P.110
https://doi.org/10.1016/j.worlddev.2014.10.007 [Citations: 39]Microfinance Institutions
Sustainability and Mission Drift: Do Microfinance Institutions in Vietnam Reach the Poor?
Abeysekera, Sarath
Oguzoglu, Umut
Le, Thanh Tam
2014
https://doi.org/10.1057/9781137399663_6 [Citations: 3]Financial Efficiency and Social Impact of Microfinance Institutions Using Self-Organizing Maps
Louis, Philippe
Seret, Alex
Baesens, Bart
World Development, Vol. 46 (2013), Iss. P.197
https://doi.org/10.1016/j.worlddev.2013.02.006 [Citations: 97]Social Purpose, Commercialization, and Innovations in Microfinance
Commercialization in Microfinance: Concepts, Definitions and Features
Mia, Md Aslam
2022
https://doi.org/10.1007/978-981-19-0217-8_3 [Citations: 2]The Cost of Ownership in Microfinance Organizations
Mersland, Roy
World Development, Vol. 37 (2009), Iss. 2 P.469
https://doi.org/10.1016/j.worlddev.2008.03.006 [Citations: 108]Determinants of Microfinance Outreach in India: Empirical Evidence
Saravanan, Sivagandhi
Shanmugam, K. R.
Applied Economics Quarterly, Vol. 66 (2020), Iss. 2 P.165
https://doi.org/10.3790/aeq.66.2.165 [Citations: 0]Mission impossible: diffusion and drift in the microfinance industry
Dillard, Jesse
Epstein, Marc J.
Yuthas, Kristi
Sustainability Accounting, Management and Policy Journal, Vol. 1 (2010), Iss. 2 P.201
https://doi.org/10.1108/20408021011089248 [Citations: 26]Outreach and Efficiency of Microfinance Institutions
Hermes, Niels
Lensink, Robert
Meesters, Aljar
World Development, Vol. 39 (2011), Iss. 6 P.938
https://doi.org/10.1016/j.worlddev.2009.10.018 [Citations: 444]The discourse of institutional change in the Zambian microfinance sector
Siwale, Juliana
Kimmitt, Jonathan
Lamont, Bruce
Africa Journal of Management, Vol. 5 (2019), Iss. 1 P.47
https://doi.org/10.1080/23322373.2018.1563463 [Citations: 4]Addiction to Microcredit: An Obstacle to Social And Financial Mobility
Peprah, James Atta
Koomson, Isaac
(2014)
https://doi.org/10.2139/ssrn.2976094 [Citations: 2]Microfinance au Nord : Un effet de mode importé du Sud ?
Maystadt, Jean-François
Mondes en développement, Vol. n o 126 (2004), Iss. 2 P.69
https://doi.org/10.3917/med.126.0075 [Citations: 2]Extending Financial Inclusion in Africa
A Survey of Microfinance Institutions and Informal Finance in Africa
Chikalipah, Sydney
Makina, Daniel
2019
https://doi.org/10.1016/B978-0-12-814164-9.00006-2 [Citations: 6]Inclusive Growth
How Digital Finance and Fintech Can Improve Financial Inclusion
Thomas, Howard
Hedrick-Wong, Yuwa
2019
https://doi.org/10.1108/978-1-78973-779-020191004 [Citations: 16]The impact of microfinance institutions in local financial markets: a case study from Kenya
Johnson, Susan
Journal of International Development, Vol. 16 (2004), Iss. 3 P.501
https://doi.org/10.1002/jid.1088 [Citations: 15]Balancing Paradoxical Missions: How Does Microfinance Rebuild a Sustainable Path in Poverty Alleviation?
Wang, Jiguang
Ran, Bing
Sage Open, Vol. 9 (2019), Iss. 2
https://doi.org/10.1177/2158244019857838 [Citations: 8]Microfinance Mission Drift?
Mersland, Roy
Strøm, R. Øystein
World Development, Vol. 38 (2010), Iss. 1 P.28
https://doi.org/10.1016/j.worlddev.2009.05.006 [Citations: 383]WHO GETS WHAT? DETERMINANTS OF LOAN SIZE AND CREDIT RATIONING AMONG MICROCREDIT BORROWERS: EVIDENCE FROM NICARAGUA
Mason, David R.
Journal of International Development, Vol. 26 (2014), Iss. 1 P.77
https://doi.org/10.1002/jid.2899 [Citations: 13]Impact of competition on microfinance institutions: bibliometric analysis and systematic literature review
Nisa, Chaerani
rita, Vive
Chalid, Dony Abdul
Heliyon, Vol. 8 (2022), Iss. 10 P.e10749
https://doi.org/10.1016/j.heliyon.2022.e10749 [Citations: 8]La place des mecanismes d’epargne-credit et de pret progressif dans la selection des clients des IMF en milieu urbain : le cas de WAGES en 2010
Couchoro, Mawuli Kodjovi
The European Journal of Development Research, Vol. 31 (2019), Iss. 2 P.314
https://doi.org/10.1057/s41287-018-0156-1 [Citations: 3]Competition and microfinance institutions’ performance: evidence from India
Wondirad, Hailu Abebe
International Journal of Corporate Social Responsibility, Vol. 5 (2020), Iss. 1
https://doi.org/10.1186/s40991-020-00047-1 [Citations: 9]Trade-Off between Financial Performance and Poverty Outreach - Evidences from Panel of Indian Microfinance Institutions
Masood, Tariq
(2013)
https://doi.org/10.2139/ssrn.2884162 [Citations: 0]Mission Efficiency Analysis of For-Profit Microfinance Institutions with Categorical Output Variables
Sohn, So Young
Ju, Yonghan
Sustainability, Vol. 15 (2023), Iss. 3 P.2732
https://doi.org/10.3390/su15032732 [Citations: 2]Interest rates in microfinance: What is a fair interest rate when we lend to the poor?
Wondirad, Hailu Abebe
Quality & Quantity, Vol. 56 (2022), Iss. 6 P.4537
https://doi.org/10.1007/s11135-022-01320-0 [Citations: 3]On the Social and Financial Effects of the Transformation of Microfinance NGOs
Chahine, S.
Tannir, L.
VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, Vol. 21 (2010), Iss. 3 P.440
https://doi.org/10.1007/s11266-010-9136-6 [Citations: 27]A Comparison of Two Simple, Low-Cost Ways for Local, Pro-Poor Organizations to Measure the Poverty of Their Participants
Schreiner, Mark
Social Indicators Research, Vol. 124 (2015), Iss. 2 P.537
https://doi.org/10.1007/s11205-014-0789-1 [Citations: 8]Monitoring the Diversity of the Poverty Outreach and Impact of Microfinance: A Comparison of Methods Using Data from Peru
Copestake, J.
Dawson, P.
Fanning, J.-P.
McKay, A.
Wright-Revolledo, K.
Development Policy Review, Vol. 23 (2005), Iss. 6 P.703
https://doi.org/10.1111/j.1467-7679.2005.00309.x [Citations: 54]Redefining mission drift in microfinance: Exploring the link between aims and actions at ASA
Brian Macdonald, Brian Macdonald
Enterprise Development & Microfinance, Vol. 21 (2010), Iss. 3 P.243
https://doi.org/10.3362/1755-1986.2010.021 [Citations: 1]Exploring the effect of gender diversity in MFIs during turbulent periods
Pedrini, Matteo
The International Journal of Human Resource Management, Vol. 29 (2018), Iss. 16 P.2455
https://doi.org/10.1080/09585192.2016.1246460 [Citations: 5]New Perspectives in International Business Research
Myths in microfinance
Mersland, Roy
Øystein Strøm, R.
2008
https://doi.org/10.1016/S1745-8862(08)03010-0 [Citations: 1]Understanding Social Performance: A ‘Practice Drift’ at the Frontline of Microfinance Institutions in Bangladesh
Maîtrot, Mathilde
Development and Change, Vol. 50 (2019), Iss. 3 P.623
https://doi.org/10.1111/dech.12398 [Citations: 23]The financial inclusion assemblage: Subjects, technics, rationalities
Schwittay, Anke F.
Critique of Anthropology, Vol. 31 (2011), Iss. 4 P.381
https://doi.org/10.1177/0308275X11420117 [Citations: 64]All Myth and Ceremony? Examining the Causes and Logic of the Mission Shift in Microfinance from Microenterprise Credit to Financial Inclusion
Mader, Philip
Sabrow, Sophia
Forum for Social Economics, Vol. 48 (2019), Iss. 1 P.22
https://doi.org/10.1080/07360932.2015.1056204 [Citations: 24]Retaining the social goal: role of path creation in for-profit social enterprises
Sarma, Sushanta Kumar
Journal of Management History, Vol. 26 (2019), Iss. 1 P.77
https://doi.org/10.1108/JMH-08-2018-0039 [Citations: 4]Performativity and the Politics of Equipping for Calculation: Constructing a Global Market for Microfinance
Henriksen, Lasse F.
International Political Sociology, Vol. 7 (2013), Iss. 4 P.406
https://doi.org/10.1111/ips.12031 [Citations: 9]Factors Influencing Outreach Performance of Microfinance Sector in India
Singh, Vijeta
Padhi, Puja
Asia-Pacific Journal of Management Research and Innovation, Vol. 15 (2019), Iss. 4 P.162
https://doi.org/10.1177/2319510X19883705 [Citations: 6]Doing Well by Returning to the Origin. Mission Drift, Outreach and Financial Performance of Microfinance Institutions
Pedrini, Matteo
Ferri, Laura Maria
VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, Vol. 27 (2016), Iss. 6 P.2576
https://doi.org/10.1007/s11266-016-9707-2 [Citations: 16]Microfinance and Women’s Empowerment in Bangladesh
Prologue
Nawaz, Faraha
2019
https://doi.org/10.1007/978-3-030-13539-3_1 [Citations: 1]The impact of international influence on microbanks’ performance: A global survey
Mersland, Roy
Randøy, Trond
Strøm, Reidar Øystein
International Business Review, Vol. 20 (2011), Iss. 2 P.163
https://doi.org/10.1016/j.ibusrev.2010.07.006 [Citations: 100]Interest Rates and Financial Performance of Microfinance Institutions: Recent Global Evidence
Kar, Ashim Kumar
Swain, Ranjula Bali
The European Journal of Development Research, Vol. 26 (2014), Iss. 1 P.87
https://doi.org/10.1057/ejdr.2013.33 [Citations: 28]ARE FINANCIAL AND SOCIAL EFFICIENCY MUTUALLY EXCLUSIVE? A CASE STUDY OF VIETNAMESE MICROFINANCE INSTITUTIONS
LEBOVICS, Maxime
HERMES, Niels
HUDON, Marek
Annals of Public and Cooperative Economics, Vol. 87 (2016), Iss. 1 P.55
https://doi.org/10.1111/apce.12085 [Citations: 62]Slum upgrading with community-managed microfinance: Towards progressive planning in Indonesia
Das, Ashok
Habitat International, Vol. 47 (2015), Iss. P.256
https://doi.org/10.1016/j.habitatint.2015.01.004 [Citations: 22]Financial sustainability of microfinance institutions in sub-Saharan Africa: evidence from GMM estimates
Sydney Chikalipah, Sydney Chikalipah
Enterprise Development & Microfinance, Vol. 28 (2017), Iss. 3 P.182
https://doi.org/10.3362/1755-1986.16-00023 [Citations: 19]- Value chain financing: evidence from Zambia on smallholder access to finance for mechanization
- Developing agro-pastoral entrepreneurship: bundling blended finance and technology
- Building frontline market facilitators' capacity: the case of the ‘Integrating Very Poor Producers into Value Chains Field Guide’
- Boosting financial inclusion through social assistance reform: evidence-based approach in selecting a payment system
- Impact of COVID-19 on livestock exports from Somalia and the Horn of Africa
Browse our other journals
