Intended and unintended effects of specialized regulation on microfinance institutions’ double‐bottom line management

Taking advantage of the passage a microfinance law in Italy (2014), we explore rationales for introducing microfinance-specific regulation high-income welfare states and potential effects that this process may have on MFIs’ social financial performances (i.e. double bottom line). Our findings suggest institutional transformation MFIs, addition to product design target group required by new regulation, has unintendedly shifted their balance favor over performance. This mainly applies non-profit organizations cooperatives. Microfinance-specific reflect emerging trends market-based rationality public policy. When regulatory arrangements MFIs are stipulated irrespectively original mission structural causes exclusion be reinforced. The underlying trade-off should considered prevent mitigate unintended regulation.