Programmed Initiative, Reaching the Extreme Poor and MFI Sustainability: Mission Drift or Diseconomy?

This study was conducted to examine the impact of programmed initiative on MFI sustainability and to analyze the tradeoff between the depth of outreach and sustainability. Based on panel data of 223 MFI branches in Bangladesh over a period of five years, this study documents that extreme poverty is not a deterrent to MFI sustainability. That means, MFIs reaching the extreme poor can remain sustainable and in essence, they do not have to make a tradeoff with the depth of outreach. This has crucial implications for MFI operations and financing. This study also documents that MFIs undertaking programmed initiative to alleviate poverty can become sustainable if they attain the critical factors. Further to this, this study provides evidence that direct subsidy creates disincentive for MFIs to become sustainable.