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The Role of Trust-Control Mechanisms in Operations Processes: Mitigating Mission Drift in a Microfinance Institution in Gujarat, India

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  • Viresh Amin

    (Department of Management, Birkbeck College University of London)

Abstract

This study explores how managers of microfinance institutions (MFIs) use trust-control mechanisms in the operation processes to mitigate the problem of mission drift arising out of the need to meet the dual goals of social development and financial self-sustainability. Using a case study methodology, purposive sampling, and replication logic, data from the operations processes of four geographically different sites of a microfinance institution in Gujarat, India were analyzed. The findings suggest that the managers of microfinance institutions balance integrity-trust, benevolence-trust, competence-trust, and control mechanisms to achieve dual goals of social development and financial self-sustainability. The conditions and contingencies under which trust-control mechanisms are most effective for mitigating mission drift are identified. The findings also indicate that managers of the microfinance institution use calculative and relational forms of trust to achieve the empowerment of women borrowers along with the fulfilment of the aims of financial self-sustainability. Finally, the study places mission drift mitigation within its ethical context by examining client vulnerability and the MFI’s operational responses.

Suggested Citation

  • Viresh Amin, 2014. "The Role of Trust-Control Mechanisms in Operations Processes: Mitigating Mission Drift in a Microfinance Institution in Gujarat, India," Management Working Papers 7, Birkbeck Department of Management, revised Jun 2014.
  • Handle: RePEc:img:manwps:7
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    File URL: http://www.bbk.ac.uk/management/docs/workingpapers/WP7.pdf
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    References listed on IDEAS

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    1. Rajdeep Sengupta & Craig P. Aubuchon, 2008. "The microfinance revolution: an overview," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 9-30.
    2. Julie Steinkopf Rice, 2010. "Free trade, fair trade and gender inequality in less developed countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 18(1), pages 42-50.
    3. Sriram M S, 2002. "Information Asymmetry and Trust: A Framework for Studying Micro-Finance in India," IIMA Working Papers WP2002-09-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    4. Jensen, Michael C., 2002. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Business Ethics Quarterly, Cambridge University Press, vol. 12(02), pages 235-256, April.
    5. Niels Hermes & Robert Lensink, 2007. "The empirics of microfinance: what do we know?," Economic Journal, Royal Economic Society, vol. 117(517), pages 1-10, February.
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