Does commercialization mean mission drift? Christen (2001) argues that commercialization, which is characterized by profitability, competition, and regulation, does not have any effect on large differences in loan size between regulated and nonregulated MFIs. I used data from 28 Latin American MFIs to conduct a multiple regression analysis to test for some of Christen's conclusions, as well as for other factors that, according to the literature on microfinance, may affect loan size. The results of the regression indicate first that the type of institution, in terms of NGO versus financial institution, regardless of being regulated or not, has no effect on loan size. Second, the age of the institution predicts loan size in a direction contrary to that suggested by Christen. Third, competition turned out to be significant, in contradiction to Christen's conclusion; it appears that more competition may lead to larger loan sizes and less depth of outreach. Finally, the models confirm an old belief in microfinance: there is a trade-off between depth and sustainability.
Francisco Olivares-Polanco is currently working as a Consultant for CANTV, the largest telecommunication company in Venezuela.
Journal of Microfinance
Issue and Volume
BYU ScholarsArchive Citation
"Commercializing Microfinance and Deepening Outreach? Empirical Evidence from Latin America,"
Journal of Microfinance / ESR Review: Vol. 7
, Article 5.
Available at: http://scholarsarchive.byu.edu/esr/vol7/iss2/5