Finance and the social mission: a quest for sustainability and inclusion

Abstract

Purpose The purpose of this paper is to probe whether the quest for sustainability in financial social enterprise institutions leads to mission drift. Both formal and informal institutions play an important role as interventions to promote inclusion. They struggle between an explicit social mission and the implicit quest for sustainability. The debate remains on whether such organisations can achieve financial sustainability without compromising outreach. Design/methodology/approach The study uses interviews and focus group discussions in nine different hybrid organisations involved in providing different types of financial services in Swaziland. Findings The results suggest that smaller and informal enterprises tend to have less mission drift. Their risk mitigation and management approaches such as group liability and use of traditional governance structures are more adapted to the characteristics of the groups served. The modus operandi of larger enterprises tends to mimic mainstream lenders with risk mitigation measures that are inherently unsustainable for this type of market. Research limitations/implications Sustainability in financial enterprises requires new contextualised models of risk management and client selection more appropriate for excluded groups. Moreover, using group lending as a measure of outreach maybe flawed. Other forms of social capital can be used to increase outreach even in the absence of group lending. The perceived trade-off between commercial gain and outreach is somewhat complex. Mission drift seems to depend on the capital structure. Originality/value The paper contributes to an infant but important debate on how sustainability can be achieved without compromising outreach in financial institutions designed to increase financial inclusion.

Progressive Financing in Indonesian Islamic Microfinance Institutions: Improved Monitoring or Distinctive Commercialisation?

“…There are some caveats in our research. First, there is the possibility that profit orientation may lead to mission drift, in which micro-finance needs are focused more on outreach than on loan size (Simatele & Dlamini, 2019). However, the unique Islamic scheme, which integrates social and commercial activities in BMT, means mission drift is not an issue.…”

“…However, as the size of MFIs increases, there is higher tendency for such drift as an outcome of the pursuit of financial sustainability. Further research on MFI mission drift has found that MFIs need to balance achievement of their explicit social purpose, which lays the very basic foundation for their being, with the implicit task of reaching sustainability (Simatele & Dlamini, 2019). It is continuously questioned whether MFsI might reach a state of financial sustainability without sacrificing the level of outreach.…”

Constraints to formal small business performance in the service sector in Cameroon

“…The self-reinforcing nature of networks means that these adverse effects can be transmitted through networks and hurt present prospects of accessing finance and future borrowing (Postelnicu et al, 2014). For instance, Simatele and Dlamini (2020) show that microfinance institutions in Eswatini use social ties within chieftainships called Umphakatsi to screen potential borrowers and enforce repayments. Defaulters are not recommended for further loans and can also be excluded from group borrowing.…”

“…, 2014). For instance, Simatele and Dlamini (2020) show that microfinance institutions in Eswatini use social ties within chieftainships called Umphakatsi to screen potential borrowers and enforce repayments. Defaulters are not recommended for further loans and can also be excluded from group borrowing.…”

Social Enterprise Places: A Place-Based Initiative Facilitating Syntactic, Semantic and Pragmatic Constructions of Legitimacy

“…The intertwining of commercial means with social ends for SEs requires them to demonstrate success (and not just an absence of failure) on both agendas. The complexity of this dual mission can lead to SEs experiencing "mission drift" Santos, Pache and Birkholz 2015;Simatele and Dlamini 2019;Young and Kim 2015). Doherty, Haugh and Lyon (2014) synthesis of the literature indicates that this arises from financial pressures that can lead to compromise of SEs' social objectives (Grieco, Michelini and Lasevoli 2015;Litrico and Besharov 2019;Stevens et al 2015;Zainon et al 2014).…”