Microfinance Commercialization and Mission Drift

Policy makers and practitioners agree that the scaling up of microfinance requires financial sustainability in the industry and access to commercial capital markets. At the same time they worry that the commercialization of microfinance may lead to a mission drift: Microfinance institutions (MFIs) may abandon their focus on poor, rural, female borrowers and orientate themselves towards more profitable clients. In this contribution we review the empirical evidence on commercialization and mission drift in microfinance, and the evidence is that fears of a mission drift in the industry do not seem warranted. Furthermore, we report on a recent study in which we attempt to broaden the analysis of mission drift, by comparing the impact of commercial microfinance banks as opposed to ordinary retail banks on household access to and use of bank accounts. We find that commercial microfinance banks do expand the frontier of finance providing further justification to their support by bilateral and multilateral donors.