Profit Empowerment: The Microfinance Institution’s Mission Drift
TL;DR: In this paper, the implications of imposed institutional discipline when donors adopted a new approach regarding the sustainability of Microfinance Institutions (MFIs), they transformed the intervention structure and created drastic shift in the microfinance sector.
Abstract: This chapter concerns about the implications of imposed institutional discipline When donors adopted a new approach regarding the sustainability of Microfinance Institutions (MFIs), they transformed the intervention structure and created drastic shift in the microfinance sector The chapter proposes to launch the debate by concentrating on the Indian microfinance sector with a special focus on the State of Andhra Pradesh It lay outs to what extent one can talk about the microfinance sector being dependent on donors The chapter revisits the microfinance crisis that erupted in India in March 2006 by explaining the facts and interpretations given by the various actors in the sector It raises some caution regarding the overwhelming push for MFIs to become financially self-sustainable, a push often than not exerted by donor organizations Such a push has severe consequences, ranging from a substantial one such as a mission drift to the questionable practices employed by institutions Keywords:Andhra Pradesh; microfinance institutions (MFIs); mission drift
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01 Jan 1996
TL;DR: In this paper, anthropological research on the micro-credit program of the Grameen Bank shows that bank workers are expected to increase disbursement of loans among their members and press for high recovery rates to earn profit necessary for economic viability of the institution.
Abstract: Abstract There is a growing acknowledgement that micro-credit programs have potential for equitable and sustainable development. However, my anthropological research on the micro-credit program of the Grameen Bank shows that bank workers are expected to increase disbursement of loans among their members and press for high recovery rates to earn profit necessary for economic viability of the institution. To ensure timely repayment in the loan centers bank workers and borrowing peers inflict an intense pressure on women clients. In the study community many borrowers maintain their regular payment schedules through a process of loan recycling that considerably increases the debt-liability on the individual households, increases tension and frustration among household members, produces new forms of dominance over women and increases violence in society.
740 citations
TL;DR: In this paper, the authors developed a better understanding of the pressures that can cause mission drift among social enterprises and some of the steps that social enterprises can take to combat these pressures.
Abstract: Purpose – The aim of this paper is to develop a better understanding of the pressures that can cause mission drift among social enterprises and some of the steps that social enterprises can take to combat these pressures. Design/methodology/approach – The paper is conceptual in nature. It draws on resource dependency theory, institutional theory and various extant empirical studies to develop an understanding of the causes of mission drift. This analysis is then used to examine the practical steps that social enterprises can take to combat mission drift. Findings – The paper highlights how high dependence on a resource provider and the demands of “competing” institutional environments can lead to mission drift. Based on this analysis, the paper sets out various governance mechanisms and management strategies that can be used to combat mission drift. Practical implications – The paper sets out practical steps social enterprises can take to try to prevent mission drift. While governance mechanisms provide i...
176 citations
Cites background from "Profit Empowerment: The Microfinanc..."
...Recently, there has also been considerable debate about whether the increasing commercialisation of micro-finance organisations represents a process of mission drift or just a maturing of this particular market (Christen, 2000; Armendáriz and Szafarz, 2009; Augsburga and Fouillet, 2010)....
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TL;DR: In this paper, the authors present a model to explain micro-finance mission drift, tested with hypotheses, and show a pattern of mission centered MFI: a small NGO, with labor productivity, receiving donations and obtaining a high yield.
115 citations
Posted Content•
TL;DR: In this paper, the authors investigated the causes of over-indebtedness in the micro finance industry and highlighted the role that borrowers involuntarily played in overindebting themselves.
Abstract: The microfinance industry has been celebrated both for its social impact on poverty alleviation and for its profitability. With issues of over-indebtedness emerging among microfinance customers, both achievements are at risk. This paper contributes to the industry's understanding of the definition and causes of over-indebtedness. It reveals why the 5 myths of microfinance over-indebtedness erroneously oversimplify the reality of microfinance customers. The paper works with theoretical and empirical contributions from economics, psychology and sociology, and unites microfinance specific findings with the general consumer finance literature. In addition to external influences, it highlights the responsibility of lenders in driving microfinance customers into over-indebtedness. It also recognises the role that borrowers involuntarily play in over-indebting themselves. Enhancing our understanding of what microfinance over-indebtedness is and how it is caused, the paper provides the basis for tailoring over-indebtedness solutions to the root causes of the phenomenon and addressing the challenge at all suitable levels. Latest version (June 2011) : http://www.solvay.edu/sites/upload/files/CEB_WorkingPapers/LastUpdate/wp10048.pdf
76 citations
Cites background from "Profit Empowerment: The Microfinanc..."
...Microfinance institutions in India and beyond increasingly face accusations of employing collection practices that unduly increase the burden of indebtedness for borrowers, humiliating and intimidating them or depriving them of assets (Augsburg and Fouillet, 2010)....
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TL;DR: In this article, socologist Dwight Haase explores how one man's efforts to help his village neighbors evolved into a global corporate market with unintended consequences, and provides insight into how the micro-finance movement turned into an industry.
Abstract: Sociologist Dwight Haase explores how one man’s efforts to help his village neighbors evolved into a global corporate market—with unintended consequences. Haase provides insight into how the microfinance movement turned into an industry.
70 citations
References
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Book•
01 Jan 1990
TL;DR: The Thaba-Tseka development project as mentioned in this paper has been used to study power, property, and livestock in rural Lesotho, and the deployment of development: livestock development the decentralization of crop development and some other programmes of the Thaba Tseka project.
Abstract: Part 1 Introduction. Part 2 The development apparatus: conceptual apparatus - the constitution of the object of "development" - Lesotho as "less developed country" institutional apparatus - the Thaba-Tseka development project. Part 3 The target population: the setting - aspects of economy and society in rural Lesotho the bovine mystique - a study of power, property, and livestock in rural Lesotho. Part 4 The deployment of "development": livestock development the decentralization debacle crop development and some other programmes of the Thaba-Tseka project. Part 5 Instrument-effects of a development project: the anti-politics machine epilogue - "What is to be done?"
2,482 citations
01 Mar 1994
1,828 citations
Book•
01 Jan 2005
TL;DR: A comprehensive survey of micro finance can be found in this paper, where the authors provide an overview of micro-finance by addressing a range of issues, including lessons from informal markets, savings and insurance, the role of women, the place of subsidies, impact measurement, and management incentives.
Abstract: The microfinance revolution, begun with independent initiatives in Latin America and South Asia starting in the 1970s, has so far allowed 65 million poor people around the world to receive small loans without collateral, build up assets, and buy insurance. This comprehensive survey of microfinance seeks to bridge the gap in the existing literature on microfinance between academic economists and practitioners. Both authors have pursued the subject not only in academia but in the field; Beatriz Armendariz founded a microfinance bank in Chiapas, Mexico, and Jonathan Morduch has done fieldwork in Bangladesh, China, and Indonesia. The authors move beyond the usual theoretical focus in the microfinance literature and draw on new developments in theories of contracts and incentives. They challenge conventional assumptions about how poor households save and build assets and how institutions can overcome market failures. The book provides an overview of microfinance by addressing a range of issues, including lessons from informal markets, savings and insurance, the role of women, the place of subsidies, impact measurement, and management incentives. It integrates theory with empirical data, citing studies from Asia, Africa, and Latin America and introducing ideas about asymmetric information, principal-agent theory, and household decision making in the context of microfinance. The Economics of Microfinance can be used by students in economics, public policy, and development studies. Mathematical notation is used to clarify some arguments, but the main points can be grasped without the math. Each chapter ends with analytically challenging exercises for advanced economics students.
1,624 citations
TL;DR: In this paper, a simple model of peer monitoring in a competitive credit market is presented, where the transfer of risk from the bank to the cosigner leads to an improvement in borrowers' welfare.
Abstract: A major problem for institutional lenders is ensuring that borrowers exercise prudence in the use of the funds so that the likelihood of repayment is enhanced. One partial solution is peer monitoring: having neighbors who are in a good position to monitor the borrower be required to pay a penalty if the borrower goes bankrupt. Peer monitoring is largely responsible for the successful financial performance of the Grameen Bank of Bangladesh and of similar group lending programs elsewhere. But peer monitoring has a cost. It transfers risk from the bank, which is in a better position to bear risk, to the cosigner. In a simple model of peer monitoring in a competitive credit market, this article demonstrates that the transfer of risk leads to an improvement in borrowers' welfare.
1,339 citations
Book•
20 Nov 2004
TL;DR: In this paper, Mosse shows how the actions of development workers are shaped by the exigencies of organisations and the need to maintain relationships rather than by policy; but also that development actors work hardest of all to maintain coherent representations of their actions as instances of authorised policy.
Abstract: 'A superb book, one of those rarities that can change entire ways of thinking. David Mosse is the first social scientist in a generation who can successfuly take cutting-edge insights from academic anthropology and use them to explain practical problems in development...For anyone interested in development, "Cultivating Development" is a do-not-miss experience.' Scott Guggenheim, Lead Social Scientist, The World Bank '[Mosse's] provocative thesis challenges the received wisdom of that world and compels us to examine afresh the politics and ethics of engaging with development. Amid the profusion of literature in this field, this book stands apart as an insider's account that is consistently critical yet steadfast in respecting its subjects. Highly recommended.' Amita Baviskar, Visiting Professor, Department of Cultural and Social Anthropology, Stanford University Development agencies and researchers are preoccupied with policy; with exerting influence over policy, linking research to policy and with implementing policy around the world. But what if development practice is not driven by policy? Suppose that the things that make for 'good policy' - policy that legitimises and mobilises political support - in reality make it impossible to implement? By focusing in detail on the unfolding activities of a development project in western India over more than ten years, as it falls under different policy regimes, this book takes a close look at the relationship between policy and practice in development. David Mosse shows how the actions of development workers are shaped by the exigencies of organisations and the need to maintain relationships rather than by policy; but also that development actors work hardest of all to maintain coherent representations of their actions as instances of authorised policy. Raising unfamiliar questions, Mosse provides a rare self-critical reflection on practice, while refusing to endorse current post-modern dismissal of development.
1,309 citations