Paradigm Shift of Microfinance Institutions in Nepal: A Mixed Method Approach

Abstract

This study examines how transforming from non-profit oriented to profit-oriented MFIs in Nepal impacted their performance. A mixed-methods Approach was applied where quantitative data was analysed using a Propensity Score Matching (PSM), followed by qualitative thematic analysis. The results show that the transformation of MFIs reduces their profitability and operational self-sufficiency in the short run but increases in the long run. Further, the study found that the number of clients and the loan size of profit-oriented MFIs are increasing in Nepal, which suggests that the MFIs in Nepal are drifting away from their main mission of social welfare, also known as mission drift.