The Institutional Transformation of Microfinance Institutes: Sustainability at the Expense of the Poorest?

19 Pages Posted: 19 Jun 2019

See all articles by Monika Wohlmann

Monika Wohlmann

FOM University of Applied Science

Jonathan Lessing

DZ Bank AG

Date Written: June 6, 2019

Abstract

The purpose of this paper is to introduce the three different forms of institutional transformation in microfinance - the upscaling-, the downscaling- and the greenfield-approach - and to assess in how far they contribute to a ‘mission drift’ in microfinance, away from providing affordable financial funds to the poorest towards a more profit-oriented business model. With the help of empirical findings in the existing literature on microfinance in Sub-Saharan Africa the main characteristics of these approaches are elaborated, and they are evaluated with respect to the initial aim of microfinance. The results of this paper show that the institutional transformation contributed to a broader implementation and sustainability of microfinance, though institutional transformation implies a certain mission drift. Between the poles of serving the poorest while maintaining self-sufficiency, the upscaling approach performs best, drifting less away from poor parts of the population while still stabilizing the MFI’s economic business model.

Keywords: microfinance, mission drift, institutional transformation, upscaling, downscaling, greenfielding

JEL Classification: G21, I3, F36

Suggested Citation

Wohlmann, Monika and Lessing, Jonathan, The Institutional Transformation of Microfinance Institutes: Sustainability at the Expense of the Poorest? (June 6, 2019). Available at SSRN: https://ssrn.com/abstract=3400335 or http://dx.doi.org/10.2139/ssrn.3400335

Monika Wohlmann (Contact Author)

FOM University of Applied Science ( email )

Leimkugelstarsse 6
Essen, 45141
Germany

Jonathan Lessing

DZ Bank AG ( email )

60265 Frankfurt am Main
Germany

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