The microfinance sector’s Paradigm Shift (PS) of the 1990s caused a drastic shift in how Microfinance Organizations (MFOs) ensured their long-term survival and sustainability. The PS required MFOs to adopt a commercial approach in all their operations and pursue profitability and self-sustainability rather than depending on the provision of subsidized funds. Resorting to Schatzki’s (2002) ‘site of the social’ theoretical construct and DiMaggio and Powell’s (1983) institutional theory, this empirical paper aims to evaluate the real performance of Pakistan’s microfinance sector, following the PS, in terms of its strict adherence to its founding objectives of eradicating poverty and serving the extreme poor. This qualitative empirical research paper resorts to the Case Study approach to investigate the pre- and the post-Paradigm Shift eras of Pakistan’s microfinance sector for evaluating the sector’s real ‘success’ in accomplishing its founding aim of eradicating poverty at the grass root level. Analysis of the data reveals that the microfinance sector, in its pursuit of profitability and self-sustainability, following the PS, is compromising its founding commitment to its target beneficiaries – the extreme poor. The study contributes a theory, literature and empirical evidence-informed conceptual framework to help guide organizational change initiatives in the peculiar context of a social service/not-for-profit sector and predict the outcome quality of such a change for all stakeholders. The study outcomes apprise policy-makers and practitioners of the possible negative consequences of the microfinance sector’s gradual transition from a ‘social service’ to a ‘commercial’ model for the poor.



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