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A Model of Mission Drift in Microfinance Institutions

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Author Info
Suman Ghosh () (Department of Economics, College of Business, Florida Atlantic University)
Eric Van Tassel () (Department of Economics, College of Business, Florida Atlantic University)

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Abstract

In this paper we offer a theoretical examination of the phenomenon known as mission drift. In recent years there have been claims that the entry of large donors with deep pockets have led to a mission drift phenomenon, whereby microfinance institutions who were previously catering to the poorest agents have drifted towards catering to the less poor. We offer an explanation for how the change in the lending portfolio of a poverty minimizing microfinance institution might be linked to the phenomenon of increasing commercialization through the advent of these large profit oriented donors. The degree to which lending portfolios change turns out to be a function of both the supply of donor funds and the strategic interaction between heterogeneous microfinance institutions.

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File URL: http://home.fau.edu/vantasse/web/MDDec11.pdf
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File Function: First version, 2008
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Publisher Info
Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 08003.

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Length: 23 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:fal:wpaper:08003

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Related research
Keywords: microfinance; mission drift; poverty;

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Find related papers by JEL classification:
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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    Other versions:
  3. Paul Mosley, 2001. "Microfinance and poverty in Bolivia," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(4), pages 101-132, January. [Downloadable!] (restricted)
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  7. J. Copestake & P. Dawson & J.-P. Fanning & A. McKay & K. Wright-Revolledo, 2005. "Monitoring the Diversity of the Poverty Outreach and Impact of Microfinance: A Comparison of Methods Using Data from Peru," Development Policy Review, Overseas Development Institute, vol. 23(6), pages 703-723, November. [Downloadable!] (restricted)
  8. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series 3827, The World Bank. [Downloadable!]
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  9. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-59, March. [Downloadable!] (restricted)
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  10. Amin, Sajeda & Rai, Ashok S. & Topa, Giorgio, 2003. "Does microcredit reach the poor and vulnerable? Evidence from northern Bangladesh," Journal of Development Economics, Elsevier, vol. 70(1), pages 59-82, February. [Downloadable!] (restricted)
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  11. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May. [Downloadable!] (restricted)
  12. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," World Bank Economic Review, Oxford University Press, vol. 19(2), pages 263-286.
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