Microfinance institutions (MFIs) were founded with a clear purpose: to provide access to financial services for underserved communities - often low-income, informal, or rural clients - who are typically excluded from traditional banking. As MFIs grow, they adapt their services to meet evolving needs, and the clients they serve, ideally growing alongside them.
This might look like:
- Broadening their end client base from only informal or low-income borrowers to include middle income and/or salaried clients
- Moving from only income-generating loans (like agriculture or micro-enterprises) to include much needed consumer credit like education, water/sanitation and home improvement loans
- As the demand for credit grows, offering larger loans that meet the growing needs of their client base rather than adhering to loan size limits that no longer meet the needs of their clients (usually the best/most successful clients)
Sometimes these shifts can be driven by the MFIs pursuit of scale, profitability, or new market segments. For example, an MFI that originally focused exclusively on smallholder farmers might pivot to additionally offering consumer loans in urban areas, chasing better margins or lower risk profiles. While this can make financial sense and open new impact pathways, it may also shift focus away from the institution’s original social mission - unless intentional efforts are made to stay aligned with inclusive finance goals.
At EQ, we recognize that institutions can create value in different ways throughout their growth journey. What matters most is that the evolution remains guided by a clear purpose, continues to serve underserved segments, treats end clients fairly, and upholds responsible lending practices.
Evolution can be Positive!
That said, evolution isn’t inherently negative. Many MFIs rightly adapt their offerings to meet the changing needs of long-standing clients. When a borrower who started with a $500 loan to expand her tailoring business now needs $2,000 to open a second location, that’s not mission drift - that’s client progression.
The key is whether the institution stays anchored to its core mission while growing alongside its clients. In this light, product innovation can be a natural and positive reflection of client development.
Expanding into areas like SME lending doesn’t necessarily mean abandoning the mission - quite the opposite. Small and medium enterprises are often another underserved or overlooked segment, and supporting them can be a powerful driver of inclusive growth.
Ultimately, what matters is how MFIs grow - and whether they remain grounded in their mission while doing so.
How EQ Tracks Mission-Aligned Growth
We work with a diverse portfolio of financial institutions across the spectrum - from small, emerging MFIs serving rural communities to established banks with extensive distribution networks in emerging markets. Each plays a unique role in advancing financial inclusion, whether it's providing first-time access to credit for informal entrepreneurs or scaling digital solutions to reach underserved populations.
We’ve also developed a multi-layered approach to monitor how financial institutions evolve - and to identify when growth patterns may begin to diverge from an institution’s original social mission. This helps us support intentional, impact-driven transformation rather than reactive or unexamined shifts.
Our monitoring includes:
- Strategic interviews: We engage with senior management to understand changes in strategy, client focus, or market positioning.
- Product review: We assess whether new financial products align with the institution’s stated mission and target segments.
- Portfolio analysis: We examine loan purposes, sector exposures, and client demographics to detect shifts in service patterns.
- Loan size tracking: We monitor average loan size over time, comparing changes to inflation and local economic benchmarks. Significant, unexplained increases may suggest a move away from low-income clients.
We recognize that institutions evolve - and that impact can take many forms across different business models and stages of growth. A shift in client base or product mix doesn’t automatically imply a loss of purpose. But when we identify patterns that could dilute financial inclusion, we engage with the institution to understand the drivers, assess alignment with their mission, and - where appropriate - encourage recalibration.
In some cases, we continue to support institutions that have evolved toward serving different segments, provided they uphold strong ESG standards and deliver meaningful value to underserved markets. In others, we may limit further engagement if we believe the institution’s direction no longer aligns with our investment mandate.
What matters most is that change is intentional, inclusive, and anchored in impact - not driven solely by commercial incentives.
The Bottom Line
Evolution isn’t inherently bad - as long as it’s intentional. The strongest MFIs are those that evolve thoughtfully, meeting their clients’ changing needs while staying rooted in their original purpose.
Ultimately, the most sustainable institutions are those that balance solid financial performance with a lasting commitment to financial inclusion and sustainability. That balance is what makes this work both challenging and meaningful.