Mission impossible: diffusion and drift in the microfinance industry

The purpose of this paper is to thoroughly examine sources of mission diffusion and mission drift in the microfinance industry and to identify consequences of and remedies to these problems.

Extensive field experience relating to individual microfinance institutions (MFIs) and industry trends provides the grounding for a review of the trade and academic literatures in microfinance and social enterprise management.

Mission diffusion arises from pursuing diverse approaches to poverty alleviation and addressing disparate and changing stakeholder interests. Mission drift arises from commercialization and conversion activities aimed toward enhancing ratings and achieving scale. Mission clarity can be regained through clarification of the mission along with more effective corporate governance and performance management systems.

The tension between financial and social performance is not merely ideological – economic realities make it almost impossible to stay on mission. Understanding these realities can help MFIs maintain and regain clarity of mission.

The paper sheds new light on reasons the microfinance industry has not been able to deliver on promises of poverty alleviation during a period of heavy demand rapid scaling.