From Social Rating to Seal of Excellence: Utility or Futility?

Abstract:     
The microfinance sector stated with a promise of being good for poverty reduction. Thus, there was a social bottom line. Instead of giving charity, we were giving loans which help make the poor responsible and entrepreneurial. Thus microfinance developed with a strong social bottom line brand image. Donors rushed in. It was soon clear that if the MFI is not durable over time, then the social impact is minimal. Since donors are subject to fads, we need to wean away the sector from free funds and grants. Thus, we brought in the double bottom line: profits and social impact. The brand image of microfinance got modified: diluted as well as reinforced: diluted, because in addition to making poor people responsible and entrepreneurial, we were insisting that the MFIs themselves be responsible and economically sustainable; reinforced, because it now indicated that both the poor and the IMF associated with the movement would eventually not require donor finance. It seems that the double bottom line mission has generally become reduced to a focus on profits as MFIs realized that there is money to be made and that the amount of profits depends on scale. The rush to scale and taylorism made one forget the social impact. Can social rating or social labeling reinforce the social mission?

Number of Pages in PDF File: 6

Keywords: social rating, social labeling, microfinance, MFI, double bottom line

working papers series