A State-Oriented Stakeholder Approach: Understanding the Ethics of Microfinance in Emerging Economies
42 Pages Posted: 9 Mar 2014 Last revised: 16 May 2015
Date Written: August 1, 2014
The integrity of microfinance is in question. Unethical practices have led many to question its value. Yet, research and countless narratives suggest positive, though modest, effects. I argue that a false dichotomy of support or opposition for microfinance has emerged; a tendency that ignores the microfinance variation. Instead, this article asks: what is the role of the state in influencing stakeholder salience and how does this process affect the ethics of microfinance? This article develops a new approach—a state-oriented stakeholder approach (SOSA)—by weaving together political economy and stakeholder theory literatures. This approach shows how the state, a unique stakeholder, uses regulation to augment or abate other stakeholders’ salience. It helps explain variation in stakeholder salience and informs a typology of microfinance developed here—state-supported, bottom of the pyramid, and hybrid. Drawing from original fieldwork, this typology provides a more nuanced framework to understand how the state influences microfinance institutions’ practices by affecting stakeholder salience.
Keywords: Business ethics, stakeholder approach, political economy, microfinance, business and society
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