Social - financial synergies and legitimacy strategies in microfinance social enterprises: a systematic review

Abstract

By using the PRISMA framework, this study carries out a systematic literature review to investigate how microfinance social enterprises (MFSEs) balance their financial and social objectives (i.e. dual objectives or dual mission) and maintain legitimacy. The Scopus journal database was used to conduct this systematic literature review. The initial search yielded 109 records when broad keywords (i.e. Microfinance and social enterprise) were used. The selection was further refined by using inclusion and exclusion criteria, and two recurring themes: mission drift and legitimacy that emerged in the initial search. This has resulted in the identification of 38 articles for the study. The period considered for the study is 2014 to 2025, and the study focused on MFSEs balancing dual objectives to reduce mission drift and maintain legitimacy. Mission drift takes place when MFSEs try to achieve financial objectives, ignoring the social objectives. Legitimacy is the perception of stakeholders that MFSEs achieve both financial and social objectives. MFSEs have to use different strategies to mitigate mission drift. The review reveals that large and mature MFSEs underpinned by good governance and prudent risk management are more capable of achieving the balance between financial and social objectives. Mission drift could also be reduced by disciplined financial management, client-centred strategies, good governance, and embedding the social outcomes into performance assessments. The review further shows that legitimacy can be improved by deploying structural and symbolic strategies. Structural strategies include partnering with local authorities, working with communities and empowering people in decision-making. Examples of symbolic strategies include clever use of language and being involved in philanthropic activities. The findings of this study could help MFSE leaders and policymakers to enhance governance, accountability and resilience.