Money or Clients, Analyzing the Trade-off between Financial Sustainability and Social Responsibility Among Microfinance Institutions in Tajikistan

Abstract

Tracking simultaneous goals in microfinancing that is financial sustainability and social responsibility is a challenging job for policy makers, practitioners and researchers. This paper analyzes the trade – off between financial sustainability and social responsibility of microfinance institutions in Tajikistan. Having observed activity of three large and small microfinance institutions through measurable indicators of financial sustainability and social responsibility, the author finds evidence that there is a trade – off between dual missions of microfinancing. The problem associated with trade – off in microfinancing is that it can lead to mission drift. The result of the study showed that the main reason why financial sustainability is negatively correlated with social responsibility is an increase of loan portfolio at risk of microfinance institutions. As a result, microfinance institutions concentrate mainly on better off customers with different sources of income and diverge from their target customers (poor and underserved people). Thus, the study suggests that microfinance institutions have to study the trade – off separately based on the level of regions social and economic development and do not move away from poor segment population of the country.