The Commercialization of the Microfinance Industry: Is There a ‘Personal Mission Drift’ Among Credit Officers?
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Recent research suggests that many microfinance institutions increasingly focus on financial performance at the expense of the social component of their dual objectives. Existing studies typically assume that capital providers and managers mainly drive this so-called mission drift. In this study, we investigate whether ‘personal mission drift’ at the credit officer level can further explain the reduced emphasis on poorer clients among microfinance institutions. We present both qualitative and quantitative evidence that more experienced credit officers tend to serve fewer vulnerable clients. Specifically, we show that all else being equal, credit officer experience is negatively correlated with the provision of small loans, loans to young clients, and loans to clients with disabilities. Our qualitative analysis suggests that perceived client risk and preferences for increased time efficiency mainly drive more experienced credit officers’ relative neglect of more vulnerable clients. This drift appears to be reinforced by the industry’s incentive schemes. Therefore, credit officer incentives and training should be designed to prevent this mission drift, which is observed at the microfinance institution level but is actually initiated at the credit officer level.
KeywordsMission drift Microfinance institution Ethical finance Non-profit organizations Social performance Poverty alleviation Credit officers
We are grateful for comments from Marek Hudon, James Copestake, Trond Randøy, two anonymous referees and seminar participants at the Fourth European Research Conference on Microfinance, Geneva, Switzerland. We thank staff at Banco D-MIRO for their contributions to this study.
Compliance with Ethical Standards
Conflict of interest
Roy Mersland has for many years worked for the Norwegian Mission Alliance, the founder and owner of Banco D-MIRO. Nowadays, he still serves as a board member of the bank. However, with respect to the specific issues discussed in our paper, we believe that Mersland’s relations to Banco D-MIRO do not cause any conflicts of interest. Leif Atle Beisland declares that he has no conflict of interest. Bert D’Espallier declares that he has no conflict of interest.
All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki Declaration and its later amendments or comparable ethical standards.
Informed consent was obtained from all individual participants included in the qualitative study. Additional informed consent was obtained from all individual participants for whom identifying information is included in this article.
Animal Rights Statement
This article does not contain any studies with animals performed by any of the authors.
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