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Microfinance, the long tail and mission drift


  • Serrano-Cinca, Carlos
  • Gutiérrez-Nieto, Begoña


Poor people were excluded from financial services until microfinance institutions (MFIs) emerged. The mission of MFIs is to alleviate poverty, contributing to women empowerment, especially in rural communities. Microcredits can be analyzed under Pareto's 80/20 Principle. Their clients are situated in the long tail of the wealth distribution function. This niche market is not very attractive, because of its high administrative costs, lack of deposits and the need for compensating low revenues with fluctuating subsidies. Some MFIs have drifted from their mission. This paper presents a model to explain microfinance mission drift, tested with hypotheses. The results from the empirical study show a pattern of mission centered MFI: a small NGO, with labor productivity, receiving donations and obtaining a high yield. It can be concluded that there is a need for reducing interest rates. According to the long tail theory, this could be done by using efficient technology, as it has been achieved in the e-commerce sector.

Suggested Citation

  • Serrano-Cinca, Carlos & Gutiérrez-Nieto, Begoña, 2014. "Microfinance, the long tail and mission drift," International Business Review, Elsevier, vol. 23(1), pages 181-194.
  • Handle: RePEc:eee:iburev:v:23:y:2014:i:1:p:181-194 DOI: 10.1016/j.ibusrev.2013.03.006

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    References listed on IDEAS

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    1. repec:eee:quaeco:v:65:y:2017:i:c:p:1-15 is not listed on IDEAS
    2. Md Aslam Mia & Shamima Nasrin & Zhang Cheng, 2016. "Quality, quantity and financial sustainability of microfinance: Does resource allocation matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(3), pages 1285-1298, May.
    3. Md Aslam Mia & V. G. R. Chandran, 2016. "Measuring Financial and Social Outreach Productivity of Microfinance Institutions in Bangladesh," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 505-527, June.
    4. repec:bla:afrdev:v:29:y:2017:i:1:p:16-27 is not listed on IDEAS
    5. Julie De Pril & Cécile Godfroid, 2017. "How to Reconcile Financial Incentives and Prosocial Motivation of Loan Officers in Microfinance?," Working Papers CEB 17-011, ULB -- Universite Libre de Bruxelles.
    6. repec:eee:bushor:v:60:y:2017:i:6:p:865-874 is not listed on IDEAS
    7. Joshua K Ault, 2016. "An institutional perspective on the social outcome of entrepreneurship: Commercial microfinance and inclusive markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(8), pages 951-967, October.
    8. Dan Brockington & Nicola Banks, 2014. "Exploring the Success of BRAC Tanzania’s Microcredit Programme," Brooks World Poverty Institute Working Paper Series 20214, BWPI, The University of Manchester.


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