“Mission Drift in Microfinance: The influence of institutional and country risk indicators on the trade-off between the financial and social performances of MFIs” Pim Engels UMM Award 1 st Prize 2009

Mission Drift in Alive! "We have to note that some microcredit providers have increased their earnings while their costs decreased. In such cases, financial gain has become more important than sustainable development.” (Princess Máxima, 2010)

Definition(s) of Mission Drift  "In essence, it’s a concern about for-profit investors overriding the interest of other stakeholders, mainly the interest of clients, by inevitably pressuring management for higher interest rates and quick profits, therefore drifting from the mission of serving the best interest of clients.” (Carlos Danel, co-founder of Compartamos Banco, 2010)  “… a shift in the composition of new clients, or a reorientation from poorer to wealthier clients among existing clients.” (Cull, Demirgüc- Kunt, and Morduch, 2007)  “ … a phenomenon whereby an MFI increases its average loan size by reaching out wealthier clients neither for progressive lending nor for cross subsidization reasons.” (Armendáriz and Szafarz, 2009)

Introduction to Thesis Supervision Thorsten Beck (Tilburg University); internship ING Microfinance Objective: Find emperical evidence on mission drift, allowing institutional investors to recognize and prevent mission drift taking place in their portfolios Problem statement  What is the explanatory function of the institutional and country risk indicators in predicting the financial and social performance of MFIs?  How do institutional and country risk indicators affect the trade-off between the financial and social performance of MFIs?

Introduction to Research Model  Operational-self sufficiency  Return on assets  Profit margin  Average loan size/GDP per capita  Average loan size/GDP per capita 20% poorest  Percentage women borrowers  Type of institution  Regulation  Network membership  Age of MFI  Size of MFI  Country risk indicator

Main Conclusions

About Internship Grameen Bank (2007) Internship ING Microfinance (2009) Graduated MSc Economics Tilburg University (2009) Winner University Meets Microfinance Award (2009) Consultant in the Field of Inclusive Finance