Commercialization and mission drift: Evidence from a large Chinese microfinance institution

Xiangping Jia, Robert Cull, Pei Guo and Tao Ma

China Economic Review, 2016, vol. 40, issue C, 17-32

Abstract: Front-line loan officers of microfinance institutions (MFIs) are important in acquiring information on potential borrowers and selecting them in accordance with the MFI's mission. We use a unique data set on loan officers and their loan portfolios from China's largest NGO microfinance institution to test whether officers' personal characteristics affect the size and quality of their loans. We study a period in which the institution shifted from reliance on government donations and subsidies to commercial sources of funding. Imposing more commercial incentives on loan officers could affect how they balance potentially competing objectives to serve the poor and pursue profitability. We find that loan officers who were formerly farmers or worked in local government were better able to maintain lending to poorer borrowers, without incurring substantially lower repayment rates on their loans. In short, it appears that the career backgrounds of loan officers did play a role in preventing mission drift.

Keywords: Microfinance; Loan officer; Commercialization; Outreach (search for similar items in EconPapers)
JEL-codes: G21 I30 J30 O12 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:40:y:2016:i:c:p:17-32

DOI: 10.1016/j.chieco.2016.05.007

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