Commercialization and mission drift: Evidence from a large Chinese microfinance institution |
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| Institution: | 1. College of Economics and Management, Northwest A&F University, Yangling 712100, Shaanxi, China;2. The World Bank, United States;3. College of Economics and Management, China Agricultural University, Beijing, China;4. Postdoctoral Programme, China Huarong Asset Management Corporation, China;5. Renmin University, China;1. LEREPS, Université de Toulouse, UT2J, France;2. CRES (Consortium for Economic and Social Research), Dakar, Senegal;3. Kedge Business School, France;4. TBS Business School, Toulouse, France, 1 place Alphonse Jourdain, 31068 Toulouse, France;5. Institut de statistique, biostatistique et sciences actuarielles, Université catholique de Louvain, Voie du Roman Pays 20, Louvain-la-Neuve B1348, Belgium |
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| Abstract: | Front-line loan officers of microfinance institutions (MFIs) are important in acquiring information on potential borrowers and selecting them in accordance with the MFI's mission. We use a unique data set on loan officers and their loan portfolios from China's largest NGO microfinance institution to test whether officers' personal characteristics affect the size and quality of their loans. We study a period in which the institution shifted from reliance on government donations and subsidies to commercial sources of funding. Imposing more commercial incentives on loan officers could affect how they balance potentially competing objectives to serve the poor and pursue profitability. We find that loan officers who were formerly farmers or worked in local government were better able to maintain lending to poorer borrowers, without incurring substantially lower repayment rates on their loans. In short, it appears that the career backgrounds of loan officers did play a role in preventing mission drift. |
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