Description: Commercialization and Mission Drift : Evidence from a Large Chinese Microfinance Institution

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Commercialization and Mission Drift : Evidence from a Large Chinese Microfinance Institution

Front-line loan officers of microfinance institutions are important in acquiring information on potential borrowers and selecting them in accordance with the microfinance institution's mission. This study uses a unique data set on loan officer...

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Bibliographic Details
Main Authors:	Jia, Xiangping, Cull, Robert, Guo, Pei, Ma, Tao
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	CREDIT PROGRAM BORROWER MICROLOAN LIABILITY PUBLIC SECTOR COMMERCIAL BANKS JOINT LIABILITY STOCK AMOUNT OF LOANS INTEREST DUMMY VARIABLES EXTERNAL FUNDING RURAL BANKING INTEREST RATE EXCHANGE FORMAL LOAN DEVELOPING COUNTRIES REPAYMENTS POLITICAL ECONOMY POSITIVE COEFFICIENT PORTFOLIO RURAL CREDIT CREDIT COOPERATIVES LOAN FINANCIAL STATEMENT CREDITWORTHINESS LOAN AMOUNT BORROWERS GOVERNMENT ASSETS ASSET MANAGEMENT LOAN DECISIONS DUMMY VARIABLE INFLATION INTERNATIONAL BANK STATE BANK DEVELOPING COUNTRY LENDER MICROFINANCE INSTITUTIONS CENTRAL BANK MATURITY SMALL BUSINESS OVERDUE LOANS FINANCIAL SUSTAINABILITY CREDIT COOPERATIVE GROUP LENDING LEGAL CONSTRAINTS REPAYMENT INCENTIVES FINANCIAL INSTITUTION COMMERCIAL BORROWING DISBURSEMENT COMMERCIAL BANK PORTFOLIOS CONTRACTS POOR BORROWERS INTEREST RATES LENDING DECISIONS FINANCIAL INSTITUTIONS LOCAL GOVERNMENT LOAN REPAYMENTS LOAN MATURITY LENDERS LOANS CREDIT PROGRAMS AGRICULTURAL BANK INVENTORY LOAN SIZES LEGAL FRAMEWORK FINANCE PORTFOLIO QUALITY LOAN TERMS SMALL LOANS INDIVIDUAL LOAN IPO TRANSACTION RURAL FINANCE LOAN REPAYMENT REPAYMENT HISTORIES GOOD REPAYMENT HISTORY CREDIT PROVIDERS REPAYMENT DIFFICULTIES FUTURE CREDIT ACCESS MICRO LOAN RETURNS REPAYMENT FINANCIAL PERFORMANCE REPAYMENT RATES DISBURSEMENTS CREDIT HISTORIES INFORMAL PROVIDERS LOAN PORTFOLIO SHARES FACE VALUE BALANCE SHEET TRANSACTION COSTS DEFAULT LOAN QUALITY MARKET COMMERCIAL BANK LOAN POSTAL SAVINGS LOAN OFFICER MICROCREDIT OVERHEAD COSTS MICROFINANCE BANK LOAN GOVERNMENT SUBSIDIES LOAN OFFICERS LOAN APPLICATIONS INVESTMENT COMMERCIAL BANKS SHARE CREDIT RATIONING LOAN PORTFOLIOS COLLATERAL POVERTY FINANCIAL RISKS GROUP GUARANTEE LOAN SIZE REVENUE PROFIT FINANCIAL SUPPORT RISK MANAGEMENT CONSUMER PRICE INDEX LENDING CHECK REPAYMENT PERFORMANCE RISK AVERSION PROFITS OUTSTANDING LOANS LIABILITIES DURABLES GUARANTEE SAVINGS BANK DEVELOPMENT BANK INCOME LEVEL MICROFINANCE INSTITUTION MICROENTERPRISES
Online Access:	http://documents.worldbank.org/curated/en/2016/05/26396730/commercialization-mission-drift-evidence-large-chinese-microfinance-institution http://hdl.handle.net/10986/24519

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Summary:	Front-line loan officers of microfinance institutions are important in acquiring information on potential borrowers and selecting them in accordance with the microfinance institution's mission. This study uses a unique data set on loan officers and their loan portfolios from China's largest nongovernmental organization microfinance institution to test whether officers' personal characteristics affect the size and quality of their loans. The analysis uses 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. The paper finds 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.