Mission drift in microfinance institutions : the case of Lebanon, Morocco and Egypt

Abstract

This paper uses panel least squares method to examine whether microfinance institutions (MFIs) in Lebanon, Morocco and Egypt are drifting away from their initial mission of poverty alleviation. We find compelling support that there is mission drift in these MFIs. More specifically, average loan size and interest rate spread are positively related to the gross loan portfolio of the MFIs, which measures profitability and financial self-sustainability. Moreover, we find that MFIs that have a higher average loan size (a proxy of the depth of outreach) also have a high profitability. In addition, we find proof that MFIs that have a wider interest rate spread are also more profitable. The results became more significant after the deletion of some independent variables.