Do the benefits of commercialization outweigh the threat of mission drift?
This case study examines the dilemma about mission drift experienced by FATEN, a Palestinian nonprofit MFI, when it considered turning into a commercial entity to attract more funds.
FATEN had ambitious growth targets in 2008, but needed funds to achieve them. Consultants from USAID-sponsored Expanded and Sustained Access to Financial Services Program (ESAF) and ShoreBank International (SBI) Limited offered to help prepare FATEN to commercialize in order access commercial bank funds. However, FATEN’s organizational culture was nonprofit, and the steps SBI suggested would have to be approved by a board more familiar with the nonprofit microfinance model. The paper discusses:
FATEN’s commercialization process in the first year, 2008-2009;
Board members' worries about mission drift;
FATEN’s progress during the second year, 2009-2010;
Technical assistance provided by the ESAF/SBI team to help FATEN focus more on accessing commercial finance.
The study concludes that FATEN appeared to be closing in on its aggressive growth targets by the end of 2009 and that 2010 will be a critical year, with the board review of FATEN’s new business plan and continued doubts about the benefits and tradeoffs of commercialization.