Doing Well by Returning to the Origin. Mission Drift, Outreach and Financial Performance of MFIs

Matteo Pedrini, Francesca Spina

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

The majority of studies discussed the existence of a trade-off between financial performance and outreach, pointing out those MFIs that look for higher profits lead to lower outreach. Another stream of research discussed the phenomena of mission drift, which see MFIs leave from their social mission, which is to provide micro financial services to break the cycle of poverty by reducing financial exclusion and move away from the traditional microcredit business model by three different ways. The paper contribute to the debate focussing the impact of mission drift phenomena on both financial performance and outreach of MFIs. This paper uses a dataset of 194 microfinance institutions (MFIs), 788 annual ratings from 2001 to 2010, collected by MicroFinanza Rating, an international MFIs' rating agency, to study and test three hypotheses on the relationship between mission drift, financial performance and outreach of MFIs. Data analyzed with mixed effect regressions shows that a trade off exist between financial performance and outreach. Results show that mission drift positively impacts on financial performance but it reduces outreach. MFIs should be encouraged to clearly define if their main aim is to assure remuneration of shareholders or if they want to contribute to the outreach of poor.
Original languageEnglish
Title of host publicationEURAM 2014
Pages1-33
Number of pages33
Publication statusPublished - 2014
EventEURAM 2014 - Valencia
Duration: 4 Jun 20146 Jun 2014

Conference

ConferenceEURAM 2014
CityValencia
Period4/6/146/6/14

Keywords

  • Microfinance

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