Has Microfinance Lost its Moral Compass?

David Hulme and Mathilde Maitrot

Global Development Institute Working Paper Series from GDI, The University of Manchester

Abstract: Abstract This paper argues that microfinance in South Asia, like mainstream finance in North America and Europe, "has lost its moral compass". Our particular concern is with microloans to vulnerable clients. Microfinance institutions (MFIs) have increasingly focussed on financial performance and have neglected their declared social mission of poverty reduction and empowerment. Loans officers in the field are under enormous pressure to achieve individual financial targets and now routinely mistreat clients – especially poor women. The values of neo-liberal mainstream finance in the rich world have spread to microcredit in the villages of Bangladesh and India. This situation is hidden from western publics who are fed the lie of "the magic of microfinance" by their media, guided by the needs and interests of mainstream finance seeking to provide some "good news" about the financial sector as scandal after scandal unfold. Urgent action is needed, particularly from the leaders of the microfinance industry, to refocus their organizations and workforce on achieving both financial and social performance targets.

Date: 2014
New Economics Papers: this item is included in nep-hme, nep-mfd and nep-pke
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:bwp:bwppap:20514

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