On Ethical Violations in Microfinance Backed Small Businesses: Family and Household Welfare

Rahul Nilakantan (), Deepak Iyengar (), Samar K. Datta () and Shashank Rao ()
Additional contact information
Rahul Nilakantan: Indian Institute of Management Indore
Deepak Iyengar: Georgia Southern University
Samar K. Datta: Indian Institute of Management Ahmedabad
Shashank Rao: Auburn University

Journal of Business Ethics, 2021, vol. 172, issue 4, No 10, 785-802

Abstract: Abstract The microfinance business model focuses largely on lending to the woman in the household, rather than the man. The belief is that women are more trustworthy borrowers than men, and that lending to women may have increased social impact. Yet in several cases, women do not have control over the loan backed business despite being the borrower of record. Such takeover of the business by the man constitutes an ethical violation. We find that high dependency ratios in the family are correlates of such ethical violations. Further, we also find that ethical violations have a significant economic cost, consistent with prior scholarship in the family-business domain. While access to microfinance increases household welfare, this beneficial impact reduces by over 50% in the presence of an ethical violation. Our results suggest that microfinance lenders need to move beyond the traditional role of just being a lender to providing advice on issues like family planning, and money management, and enforcement, thus moving closer to the solidarity economy paradigm of integrating savings and credit into broader canvases of social relationships and social structures.

Keywords: Ethical violations; Microfinance; Bottom of pyramid (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10551-020-04499-0 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:172:y:2021:i:4:d:10.1007_s10551-020-04499-0

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-020-04499-0

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().