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Has Microfinance Lost Its Moral Compass?

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JournalECONOMIC AND POLITICAL WEEKLY
DatePublished - 29 Nov 2014
Issue number48
Volume49
Number of pages9
Pages (from-to)77-85
Original languageEnglish

Abstract

This paper argues that microfinance in south Asia, like mainstream finance in North America and Europe, "has lost its moral compass". Microfinance institutions have increasingly focused on financial performance and have neglected their declared social mission of poverty reduction and empowerment. Loan 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 organisations and workforce on achieving both financial and social performance targets.

    Research areas

  • Microfinance, Bangladesh, Moral, Performance Analysis

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