Microfinance: Costs, Lending Rates, and Profitability

This chapter gives the reader an introduction to microfinance and reports how the industry has moved from generally being praised to increasingly being criticized. Particularly the chapter addresses the concern that microfinance institutions chase profits and are moving away from the poor customer segments. Our findings indicate that rather than being an industry with high profits the industry struggles with high costs and low earnings. We also find that the focus on serving poor customers do not change over time. Thus, the ‘mission drift’ claim cannot be confirmed.