Abstract
ABSTRACTThis article examines the role of microfinance staff and procedures in enabling microfinance's social mission. It does so primarily through studying institutional ruling relations and practices in rural Bangladesh. Attempting to move away from the linear and deterministic approaches of impact studies, it ethnographically scrutinizes the everyday practices of implementers. Findings point to the emergence of systemic practices that jeopardize microfinance institutions’ potential to perform their social mission. These include low client‐selection standards, hard selling of loans and forceful loan renewal, little follow‐up on loan use, and abusive and violent client‐retention and repayment‐collection strategies. This is conceptualized as a ‘practice drift’ as distinct from the commonly reported ‘mission drift’. Rather than stemming from planned, top‐down changes in institutional mission and strategy, practice drift emerges from a displacement of decision‐making processes to the branches. The article argues that observed changes in microfinance practice are enabled by decentralized structures and management systems that leave the choice of tactics used to achieve targets to the discretion of field staff.
Highlights
Determining the performance of development policy requires vast amounts of energy and resources from planners and researchers (Easterly, 2006)
The first section of the article critically examines the conceptualization of social performance within microfinance, arguing that insufficient attention is given to the implementers and processes of implementation
Member organizations include the Imp-Act consortium; Comited’Echange, de Reflexion et d’Information sur les Systemes d’Epargnecredit (CERISE) — which roughly translates as the Committee for Exchange, Reflection and Information on Credit Unions; the Small Enterprise Education and Promotion Network (SEEP); the Argidius Foundation; Foro Latinoamericano y del Caribe (FORO-LAC) — the Latin American and Caribbean Forum; and the Grameen Foundation
Summary
Determining the performance of development policy requires vast amounts of energy and resources from planners and researchers (Easterly, 2006). Studies by Arunachalam (2011), Taylor (2012) and Guerin et al (2013) closely examine the gradual commercialization of institutions in Andhra Pradesh, South India, Kenya and Mexico, providing rich countryspecific analyses of the emerging internal tensions and paradoxes within MFIs between their financial and social missions These in some ways mirror those seen in the Western financial sector’s ‘subprime crisis’ (Mader, 2015), questioning banking institutions’ capacity to uphold ethical lending practices (Hulme and Maıtrot, 2014). With a large body of scholarship focusing on measuring outreach and impact in Bangladesh, fundamental questions about the institutional performance and implementation mechanisms of these ‘institutional hybrids’ remain largely overlooked Following this introduction, the first section of the article critically examines the conceptualization of social performance within microfinance, arguing that insufficient attention is given to the implementers and processes of implementation. The conclusion summarizes the article’s main contributions and reflects on their wider significance for the microfinance industry
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