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 analysed 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.
- Developed countries