Financing Microfinance Institutions: Impacts on Organizational Strategy and Performance

Examining the influence of funding origin on MFI strategy and client relations
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This paper examines the philosophical and methodological implications of research that looks at MFI financing and its impact on MFI strategy.

Most MFIs are funded by conventional banking institutions or private donors. The role of funding institutions is important because MFIs need financial resources to fulfil their long term commitments. Using theoretical and empirical methods, the study examines the influence of funding origin on MFI strategy and the extent to which it affects MFI relationship with clients. It reviews relevant scientific literature and builds a new typology of relationship between social and economic performance and organizational structure applied on a group of observed countries.

The paper validates its hypotheses through case studies of MFIs operating in six Eastern European countries, namely, Poland, Romania, Bulgaria, Ukraine, Turkey, and Moldova. The main implications of this research encompass objectives that include:

  • Contributing to enhancement of MFI role in financial development;
  • Strengthening link between economic growth and poverty alleviation;
  • Developing indicators of social well-being and social inclusion of the poor;
  • Contributing to social and economic development polices.