Profit Empowerment: The Microfinance Institution's Mission Drift

Authors: Augsburg, Britta¹; Fouillet, Cyril²

Source: Perspectives on Global Development and Technology, Volume 9, Numbers 3-4, 2010 , pp. 327-355(29)

Publisher: BRILL

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Abstract:

In this paper we try to raise caution against the consequences of the overwhelming drive for microfinance institutions to become financially self-sustainable—more often than not pushed into this by international organizations. Such a push can have severe consequences, ranging from mission drift to questionable practices employed by institutions. Focusing on India, we discuss the extent to which donors influence the microfinance sector and identify the role that international organizations play in pushing microfinance institutions away from their primary objective of delivering financial services to the poor. Revisiting the microfinance crisis which erupted in India in March 2006, this case study reveals a fundamental problem: the zeal of private and public actors, driven by motives that are hard to relate to the fight against poverty, a new commercial niche for the former and a collection of vote banks for the latter. Understanding the origin, the driving forces, and the extent of this problem may not only help us work out an improved governance process, but may also help us evaluate the reach and limits of microfinance.

Keywords: microfinance; mission drift; self-help group; India; Andhra Pradesh; institutional discipline

Document Type: Research article

DOI: http://dx.doi.org/10.1163/156914910X499732

Affiliations: 1: The Institute for Fiscal Studies 7 Ridgmount Street London—WC1E 7AE United Kingdom +44 (0) 20 7291 4800, Email: britta_a@ifs.org.uk 2: University of Oxford 12, Bevington Road, Oxford—OX2 6LH United Kingdom +44 (0) 1865.284.985, Email: cyril.fouillet@area.ox.ac.uk

Publication date: 2010-06-01