Scaling up and Mission Drift: Can Microfinance Institutions Maintain a Poverty Alleviation Mission While Scaling up? Gaa

1. Scaling up and Mission Drift: Can Microfinance Institutions Maintain a Poverty Alleviation Mission While Scaling up? Gaamaa Hishigsuren Doctoral candidate/Consultant gaamaah!@aol.com Hishigsuren: Scaling up and Mission Drift

2. Key issues • Taxonomy of scaling up • Rationale and forms of scaling up in microfinance • Challenges and Mission drift • Application to MFIs • Issues for future research Hishigsuren: Scaling up and Mission Drift

3. Taxonomy of scaling up • Scaling up coverage/structure • Scaling up activities • Scaling up strategies • Scaling up organizational sustainability Hishigsuren: Scaling up and Mission Drift

4. Forms of scaling up in microfinance • ‘Growth’ or ‘expansion’:PRODEM in Bolivia, Grameen and ASA in Bangladesh, BRI in Indonesia • Diversifying the range of products and services: saving, insurance, pension, and leasing • Enhancing organizational sustainability: transforming into a regulated entity to mobilize public deposit as a source of lending (e.g., BancoSol, Mibanco, CARD Bank, K-Rep) and setting up a separate unit which provides training and consultancy for a fee (e.g. BRAC, Grameen Bank, and K-Rep) • Scaling up strategies: BRAC in Bangladesh Hishigsuren: Scaling up and Mission Drift

5. Scaling up of microfinance • Large unmet demand • Economies of scale to reach financial sustainability • Visibility and recognition Hishigsuren: Scaling up and Mission Drift

6. Challenges of scaling up • Portfolio quality and cost • Organizational structures • Human resource challenges • Management information systems and accounting challenges • Legal issues • Mission drift Hishigsuren: Scaling up and Mission Drift

7. Mission drift • Move towards serving: • Less risky vs. poorer clients • Urban areas versus rural areas • Less risky sectors vs. seasonal, high risk sectors (e.g. agriculture) • Cut down operational costs, incl. field staff salary and non-income generating activities • Increase costs to clients, e.g. increasing interest rate, fees, and transaction costs. • Change organizational culture, i.e. becoming more professional vs. based on personal relations. Hishigsuren: Scaling up and Mission Drift

8. Hishigsuren: Scaling up and Mission Drift

9. Conclusion • There is some evidence of mission drift when MFIs scale up • No systematic study on the implications of scaling up on the ability of MFIs to maintain the social mission • No reliable indicators of mission drift. • Need a framework and a set of indicators and tools that may be used by researchers as well as practitioners to measure the fulfillment of social mission while scaling up. • Future studies: more reliable indicators of mission drift, mechanisms that lead to mission drift and mechanisms that help retain mission while scaling up. Hishigsuren: Scaling up and Mission Drift

10. Application to MFIs, policy makers and researchers • There are various forms and strategies of scaling up • Challenges are inevitable • Conscious effort and strategy is necessary to ensure continuous adherence to the original social mission while scaling up. • Developing and incorporating a system to measure adherence to social mission, e.g. Hatch – social impact evaluation system • If the mission is at risk, assess the strategy and consider slowing down. Hishigsuren: Scaling up and Mission Drift

11. Research in progress… Mission drift: • Depth of outreach • Quality of outreach • Scope of outreach • Cost of outreach • Impact of outreach Hishigsuren: Scaling up and Mission Drift

12. Thank You