A Research On “Mission Drift” Of International Microfinance Institutions

In the past 30 years, microfinance have developed fast in many developing countries and became effective complements of the formal financial institutions. Different from traditional financial institutions which mainly focus on gaining profit, microfinance institutions(MFIs) must take into account the “double bottom lines”, that is, achieving self-sufficiency and serving the poor. However, in recent years, with the commercialization development trend of global microfinance gradually strengthening, some microfinance institutions didn’t target on serving the poor anymore and began to extend loans to the better-off clients in order to cover high operational costs and keep sustainable. This phenomenon has triggered the discussion and research on the issue of “mission drift”.This paper focuses on the issues of “mission drift” through theory analysis and empirical study. In the section of theory analysis, the paper elaborates the definition, measurement indicators, reasons and negative influence of mission drift, and analyzes the core question of mission drift, that is, the issue of the trade-off between MFIs’ self- sufficiency and depth of outreach. In the empirical section, this paper selects two types of samples which include samples of 131 MFIs and 214 MFIs and establishes the panel data model during the years 2001-2013. The paper empirically analyzes the factors that may influence MFIs’ depth of outreach through some related indicators, including indicators of financial performance, MFIs-specific characteristics and macro-economic environment. Financial performance indicators include MFIs’ cost per loan, risk control capability, profitability and operational self- sufficiency; the model also includes MFIs-specific characteristics indicators as control variables such as age, profit status and regulated status of MFIs; besides, the model creatively adds macro-economic environment indicators including foreign direct investment(% of GDP), domestic credit of private sectors(% of GDP) and credit depth. According to the results of the relationship between operational self- sufficiency and depth of outreach, this paper can infer whether mission drift occurs. The empirical results imply that MFIs pursuing high operational self-sufficiency may reduce depth of outreach and trigger the problem of mission drift. In addition, this paper finds that financial revenues, cost per loan, MFIs-specific characteristics and macro-economic environment are correlated with MFIs’ depth of outreach and mission drift.Finally, this paper pointedly proposes some advice to prompt MFIs to stick to the double bottom lines according to theory analysis and empirical results, in order to prevent MFIs from the trend of mission drift or the deterioration of mission drift problem.