How business model innovation facilitates microcredit in balancing social mission with commercial performance - evidence from local commercial banks

Microcredit institutions are facing commercialization transformation, and how they can balance their social mission with operational performance is a focus of research in both industry and academia. This study, based on grounded theory and the iterative canvas theory framework of business models, conducts a multi-case study of three local commercial banks in Taizhou, exploring the inherent logic of how these banks manage to balance ‘dual objectives’. The research shows that the business model innovation of microcredit institutions includes desirability, feasibility and viability. The analysis of desirability indicates that focusing on small businesses is key to successfully integrating the social mission; feasibility analysis reveals that accurate application of soft information and resource integration is essential for gaining competitive advantage; and analysis of viability shows that enhanced risk management and scaling up operations are crucial for achieving operational performance. Through data analysis of the case banks from 2012 to 2021, this study provides evidence that microcredit institutions can achieve dual objectives and offers insights into how they do so. This provides valuable lessons for enhancing financial inclusiveness and expanding the coverage of commercial banks.