Purpose – The purpose of this paper is to examine the impact of commercialization on capital structure, mission and performance of microfinance institutions (MFIs). Design/methodology/approach – Robust estimation techniques ranging from simple OLS to fixed and random effects, Tobit and two-stage least-squares regression were applied using panel data for six-year period 2003-2008. Findings – The authors' results are generally robust and indicate that leverage decreases the relative level of outreach to the very poor. This is expected as increases in cost of capital leads to higher cost of borrowing, higher default rate and increased risk. Increased use of commercial debt and equity financing lowers productivity for client-maximizing MFIs through lower conversion of savers to borrowers or the yield rate. Research limitations/implications – Analysis was done with six years of data as some of the disclosures by MFIs were missing. As comprehensive disclosures become available, a similar study can be performed to see whether degrees of freedom affected the result. However, the research results support the expected outcome and the expectations of leading practitioners. Practical implications – The study suggests that MFIs can adopt a non-commercial approach to financing as an alternative to commercialization. Such models are available in practice. Social implications – Findings suggest that mission drift experienced by MFIs due to commercialization is a wrong turn for the industry. Originality/value – The paper describes the first study of its kind in the microfinance sector that used comprehensive estimation techniques with traditional and new performance variables.