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“Mission Drift in Microfinance: The influence of institutional and country risk indicators on the trade-off between the financial and social performances of

MFIs”

Pim Engels

UMM Award 1st Prize 2009


Mission Drift in Alive!

"We have to note that some microcredit providers have increased their earnings while their costs decreased. In such cases, financial gain has become more important than sustainable development.” (Princess Máxima, 2010)


Definition(s) of Mission Drift

"In essence, it’s a concern about for-profit investors overriding the interest of other stakeholders, mainly the interest of clients, by inevitably pressuring management for higher interest rates and quick profits, therefore drifting from the mission of serving the best interest of clients.” (Carlos Danel, co-founder of Compartamos Banco, 2010)

“… a shift in the composition of new clients, or a reorientation from poorer to wealthier clients among existing clients.” (Cull, Demirgüc-Kunt, and Morduch, 2007)

“ … a phenomenon whereby an MFI increases its average loan size by reaching out wealthier clients neither for progressive lending nor for cross subsidization reasons.” (Armendáriz and Szafarz, 2009)


Introduction to Thesis

Supervision Thorsten Beck (Tilburg University); internship ING Microfinance

Objective: Find emperical evidence on mission drift, allowing institutional investors to recognize and prevent mission drift taking place in their portfolios

Problem statement What is the explanatory function of the institutional and country risk

indicators in predicting the financial and social performance of MFIs? How do institutional and country risk indicators affect the trade-off

between the financial and social performance of MFIs?


Introduction to Research Model

Operational-self sufficiency Return on assets Profit margin

Average loan size/GDP per capita Average loan size/GDP per capita 20% poorest Percentage women borrowers

Type of institution Regulation Network membership Age of MFI Size of MFI

Country risk indicator


Main Conclusions


About Internship Grameen Bank (2007) Internship ING Microfinance (2009) Graduated MSc Economics Tilburg University (2009) Winner University Meets Microfinance Award (2009) Consultant in the Field of Inclusive Finance

[email protected] “Mission Drift in Microfinance: The influence of institutional and country risk...

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