Structural Transformation, Profit and Cost: What Drive(s) Mission Drift in Indian Microfinance?

Abstract

During the recent past, all over the globe, many privately managed microfinance institutions (MFIs) have transformed into professionally managed companies, which has brought the mission drift discussion to the forefront. Along this line, over the last decade, the Indian counterparts also have changed their positions and moved towards commercialisation of their business. Keeping transformation in the background, this article tries to capture the mission of drift magnitude and its dimensions and to identify the drivers of drift. With the help of empirical data, it is observed that there is a significant percentage of institutions falling under the drifted category. Many of those that are new and sustainable are found to have drifted from their mission. A noticeable change in their capital structure in India, with a strong tilt towards financial sustainability among the regulated and professionally managed category, is being observed. Among the capital structure variables, the influence of capital assets ratio (CAR) on mission drift is found significant. Though the profit motive is not established, the increasing pressure to remain financially viable because of a higher level of equity infusion forces MFIs to drift further from their mission.