Mission Drift of Large MFIs?

Analyzing perceptions about microfinance
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This paper examines recent criticisms against microfinance, and suggests that large MFIs that care about sustainability have greater social welfare impact than small, weak and transitory organizations.

Since the Mexican MFI, Compartamos, went public in 2007, leading journals and magazines have repeatedly run sceptical articles about microfinance. The paper states that large MFIs:

  • Reach a majority of microfinance clients around the world;
  • Offer a wider choice of microfinance products at lower cost;
  • Serve a larger proportion of women;
  • Pay their staff better and offer them better prospects of a professional career;
  • Operate under economies of scale that diffuse fixed costs;
  • Have professional acumen and convincing business models;
  • Channel more funding from banks to their clients.

Large MFIs may not always reach the poorest, but, if their access to capital markets were to be capped, it would be a disservice to the huge number of unbanked households. To address this concern, MFIs must avoid the risk of growing wide without growing deep, and experts as well as journalists should avoid presenting an image of microfinance that is not validated by facts.