When Growth Changes the Mission: Lessons from Microfinance

Imagine you are poor and have never had access to a formal bank.

You need ₹20,000 to start a small business. A bank may ask for documents, collateral, a credit history, or guarantees that you simply do not have.

Then someone comes to your village and says:

“You don't need collateral. We can give you a small loan.” For millions of low-income people, this sounded like a breakthrough.

And in many ways, it was.

But what happens when the very system created to serve poor people starts changing—and the people it was created for are no longer at the centre?

That is where the story of microfinance becomes an important lesson for social entrepreneurs.

From Financial Exclusion to Microfinance

Beneficiary drift happens when the people who benefit from an organization gradually become different from the people it was originally created to serve.

For a long time, access to formal finance was a major challenge for low-income communities.

Traditional banks were often reluctant to lend small amounts to people without collateral or conventional credit histories. This left many poor households dependent on informal moneylenders.

Then microfinance gained global attention.

The work of Muhammad Yunus and Grameen Bank demonstrated that small loans could be provided to low-income borrowers, particularly women, without relying on the conventional collateral-based banking model.

The idea was powerful:

What if poor people were not excluded from finance simply because they were poor?

Microfinance became closely associated with the larger idea of financial inclusion—bringing people who had been outside the formal financial system into it.

India also became an important centre for the growth of microfinance. Organizations and institutions began developing models to provide credit to low-income households and support livelihoods.

When Microfinance Became a Crisis

By the late 2000s, Andhra Pradesh in India had become one of the major centres of India's microfinance industry.

But rapid expansion brought serious problems.

Multiple lenders were sometimes lending to the same borrowers. Household debt increased, and concerns grew about aggressive repayment practices and borrower over-indebtedness.

In October 2010, the Andhra Pradesh government introduced an emergency ordinance that effectively halted microfinance activities in the state. The crisis raised questions not only about regulation and lending practices, but also about what microfinance had become.

Research on the crisis found that many borrowers were taking multiple loans, while a substantial share of borrowing was being used for immediate consumption, repayment of existing debts, and healthcare expenses rather than productive investment.

The crisis did not mean that the idea of microfinance itself was meaningless.

Rather, it exposed what can happen when a social-purpose model grows rapidly and the relationship between financial sustainability, institutional incentives and the needs of beneficiaries becomes difficult to manage.

Vijay Mahajan, one of the pioneers of microfinance in India and the founder of BASIX, was closely associated with the sector during this period.

Along with T. Navin, he later examined the experience in Microfinance: From the Fire to the Frying Pan?, published as part of Microfinance in India: Growth, Crisis and the Future.

The title itself captures an important question: when we try to solve one problem, are we sometimes creating another?

This is a question that goes beyond microfinance.

It brings us to an important concept for every social enterprise:

What Is Beneficiary Drift?

A social enterprise is usually created with a particular social problem and a particular group of people in mind.

Over time, however, the organization may start serving a different group.

Perhaps the original beneficiaries are expensive to reach.

Perhaps another group is more willing to pay.

Perhaps investors are looking for faster growth.

Perhaps a new market opportunity appears to be financially more attractive.

None of these decisions necessarily looks wrong by itself.

But gradually, the organization may move away from the people it originally intended to serve. This is beneficiary drift.

Beneficiary drift happens when the people who benefit from an organization gradually become different from the people it was originally created to serve.

It is related to mission drift, but the focus is different.

Mission drift asks: Are we moving away from our original purpose?

Beneficiary drift asks: Are we still serving the people for whom we created the organization?

The two can happen together.

And beneficiary drift can be particularly difficult to notice because the organization may still be growing, generating revenue and creating some form of social value.

5 Reasons Why Beneficiary Drift Matters

1. Growth does not always mean greater social impact

Imagine a social enterprise created to provide financial services to low-income households.

After five years, it has doubled its customer base.

That sounds like success.

But what if most of the new customers are relatively better-off households because they are easier to reach and more likely to repay?

The organization has grown.

But has its impact on the people it originally intended to serve grown?

This is why social enterprises need to look beyond numbers such as total customers, revenue or geographical expansion.

The important question is not only how much you grow, but who benefits from that growth.

2. The people who need you most may be the hardest to serve

There is a natural temptation for organizations to move towards customers who are easier to reach.

Consider a social enterprise working with low-income communities.

The poorest households may require more time, more flexible pricing, additional support and greater investment in outreach.

A slightly wealthier customer may be easier to acquire and more profitable.

From a conventional business perspective, moving towards that customer may make perfect sense.

But for a social enterprise, it creates a difficult question:

If the people with the greatest need are the most difficult to serve, will we continue designing our organization around them?

The answer to that question can determine whether an organization remains genuinely inclusive.

3. Affordable does not always mean accessible

This is particularly important in healthcare.

Imagine a healthcare social enterprise offering a consultation for ₹500.

Compared with a private hospital charging ₹1,000 or more, the service may appear affordable.

But what if a low-income family cannot afford ₹500?

Or the nearest centre is 40 kilometres away?

Or the patient has to lose a day's income to travel there?

Or the consultation is affordable but the required diagnostic tests and medicines are not?

The service may be affordable, but is it actually accessible?

This distinction matters.

Social enterprises need to look at the entire experience of the beneficiary—not simply the price of the product.

A healthcare service designed for low-income communities, for example, may need to consider location, transportation, working hours, payment options, follow-up care and the cost of complementary services.

Affordable is not always accessible.

4. Financial sustainability can unintentionally change priorities

No social enterprise can survive without resources.

Financial sustainability is therefore not the enemy of social impact.

The challenge begins when the way an organization earns money gradually determines whom it chooses to serve.

Suppose your original beneficiaries can pay ₹100 for a service, while another customer segment can pay ₹500.

Serving the second group may improve revenue and margins.

If this happens occasionally, it may not be a problem.

But if the organization increasingly redesigns its products, locations and marketing around the customers who can pay more, the business model itself can begin changing the beneficiary base.

This is one of the tensions at the heart of social entrepreneurship.

The question is not whether a social enterprise should make money.

The question is:

Is the way we make money helping us serve our intended beneficiaries, or gradually moving us away from them?

Research on European work integration social enterprises, or WISEs, provides an interesting parallel.

These enterprises are designed to create employment for disadvantaged people while generating revenue through the sale of products and services. Research has examined how financial and green objectives can influence mission-related outcomes in such organizations.

The lesson is relevant across sectors: the pressure to become financially stronger can sometimes change how an organization prioritizes its social purpose.

5. Beneficiary drift forces social enterprises to look at themselves

Perhaps the most important reason to pay attention to beneficiary drift is that it requires an organization to periodically examine itself.

A social enterprise can keep the same mission statement on its website for ten years while the actual organization changes significantly.

So it needs to ask:

• Who did we originally intend to serve?

• Who are we serving today?

• Who benefits most from our growth?

• Who is still being left out?

• Are our products actually affordable?

• Are they accessible?

• Would our original beneficiaries recognize the organization today?

These questions can be uncomfortable.

But they are necessary.

Looking at yourself critically is not a sign that the organization has failed. It is part of responsible social entrepreneurship.

☕ Coffee Break Question

If your social enterprise grows ten times in the next five years, but your original beneficiaries become a much smaller share of the people you serve, would you still consider that success?

Why?