Commercialization and Mission Drift: The Transformation of Microfinance in Latin America

Has commercialisation driven microfinance institutions away from their initial mission?

The paper discusses commercialization of MFIs in Latin America, reviewing the phases and driving forces. It observes that MFIs have clearly entered a commercial phase and discusses the various approaches to determining whether or not commercialization drives MFIs off mission.

It evaluates the major achievements of microfinance in Latin America against not only the initial mission of many microfinance institutions to generate employment and support entrepreneurship, but also against a mission of providing financial services to a target group composed of the poorest of the working poor. Drawing from Latin America and attempting to provide a sense of the state of the industry in the region and the challenges it faces, the paper looks at whether larger average loan balance of regulated institutions represent a natural evolution toward a maturing target group, or it represent mission drift.

The paper concludes that there seems to be no compelling evidence that the push toward commercialization leads MFIs to mission drift and the exclusion of poorer clients. MFIs seem generally committed to their initial mission and target group. To reach the goal of financial viability, they adapt their methods rather than redefining their clients. Nevertheless, MFIs could be cutting off the lower part of their target group as part of a strategy to enhance their financial performance.

Also available in French, Spanish and Arabic here.

About this Publication

By Christen, R.P.