Microfinance and Social Investment

Jonathan Conning and Jonathan Morduch

Annual Review of Financial Economics, 2011, vol. 3, issue 1, 407-434

Abstract: This review puts a corporate finance lens on microfinance. Microfinance aims to democratize global financial markets through new contracts, organizations, and technology. We explain the roles that government agencies and socially minded investors play in supporting the entry and expansion of private intermediaries in the sector, and we disentangle debates about competing social and commercial firm goals. We frame the analysis with theory that explains why microfinance institutions serving lower-income communities charge high interest rates, face high costs, monitor customers relatively intensively, and have limited ability to lever assets. The analysis blurs traditional dividing lines between nonprofits and for-profits and places focus on the relationship between target market, ownership rights, and access to external capital.

Keywords: corporate governance; microcredit; social entrepreneurship; leverage; prosocial behavior (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (14)

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