Digital technologies exacerbating mission drift in microfinance institutions: Evidence from India

Abstract

Digital technologies (DTs) are increasingly recognized as crucial in addressing social issues related to inequality and enhancing the well-being and agency of socially marginalized groups. We however, provide evidence that, instead of alleviating social inequalities, use of DTs (re)produced and exacerbated these inequalities in disparate forms, for an already marginalized population. Based on a qualitative study of employees from five microfinance institutions (MFIs) in India that offer uncollateralized group loans to poor rural women, our findings demonstrate how the pursuit of financial gains through DTs in providing microfinance exacerbated mission drift in MFIs, leading to reduced quality and depth of outreach. The use of DTs undermined social and human capital development — both crucial for alleviating poverty — and widened exclusion rather than bridging the gap. We explicate the quality of outreach (i.e., quality of services provided) as an additional dimension of social outreach, alongside the depth of outreach (i.e., reaching poorer borrowers) for understanding mission drift. Our findings call for consideration of existing intersectional social inequalities when leveraging DTs for social causes.