Institutional risks come in two types. The first type involves the institution’s mission, which has two aspects of its own: the social and commercial. Microfinance is a powerful development strategy because it has the potential to be a long-term means for fighting poverty and inequity. One of the greatest challenges in designing and running microfinance operation is to balance the dual mission so that your MFI: a) provides appropriate financial services to large volumes of low-income persons to improve their welfare (social mission); and b) provides those services in a financially viable manner (commercial mission). Too heavy a focus on one or the other, and microfinance will not live up to its potential.
The second institutional risk is the dependency of a microfinance program on international support organizations such as CARE. MFIs that rely on strategic, financial, and operational support from international organizations are at risk because the longer those links continue, the harder it is to break them—yet no one should be under the illusion that those links can continue indefinitely. Microfinance programs that were created as CARE projects, rather than separate institutions, are particularly vulnerable to dependency risk.