On the Social and Financial Effects of the Transformation of Microfinance NGOs

This article examines the social and financial performance of an international sample of non-governmental organizations (NGOs) which transformed into microfinance institutions (TMFI). It shows that recent calls for the transformation of NGOs into TMFIs help improve the financial sustainability and the breadth of outreach of microfinance activities. However, this transformation hinders the depth of the services provided by TMFIs. This is especially significant in the case of bank-TMFIs and suggests that although the transformation might increase the financial independence of TMFIs, it might cause a mission drift that both NGOs and policy-makers ought to consider.