Microfinance, the long tail and mission drift

Carlos Serrano-Cinca and Begoña Gutiérrez-Nieto

No 12-001, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Poor people were excluded from financial services until microfinance institutions (MFIs) emerged. The mission of MFIs is to alleviate poverty, contributing to women empowerment especially in rural communities. Microcredits can be analyzed under Pareto’s 80/20 Principle. Their clients are situated in the long tail of the wealth distribution function. This niche market is not very attractive, because of its high administrative costs, lack of deposits and the need for compensating low revenues with fluctuating subsidies. Some MFIs have drifted from their mission. This paper presents a model to explain microfinance and mission drift, tested with hypotheses. The results from the empirical study show a pattern of mission centered MFI: a small NGO, with labor productivity, receiving donations and obtaining a high margin. The need for reducing interest rates is concluded. According to the long tail theory, this can be done through the use of efficient technology, as the e-commerce sector has achieved.

Keywords: Microfinance; financial ratios; outreach; social performance; mission drift; long tail; bankruptcy (search for similar items in EconPapers)
Pages: 23 p.
Date: 2012-01
New Economics Papers: this item is included in nep-cwa and nep-mfd
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Citations: View citations in EconPapers (1)

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Journal Article: Microfinance, the long tail and mission drift (2014)
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