Has Microfinance Lost its Moral Compass?

19 Pages Posted: 6 Feb 2015

See all articles by David Hulme

David Hulme

University of Manchester - Institute for Development Policy and Management (IDPM)

Mathilde Maitrot

University of Bath

Date Written: November 20, 2014

Abstract

This paper argues that microfinance in South Asia, like mainstream finance in North America and Europe, "has lost its moral compass". Our particular concern is with microloans to vulnerable clients. Microfinance institutions (MFIs) have increasingly focussed on financial performance and have neglected their declared social mission of poverty reduction and empowerment. Loans 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 organizations and workforce on achieving both financial and social performance targets.

Keywords: Microfinance, microcredit, social performance, poverty, financial inclusion, financial scandals

Suggested Citation

Hulme, David and Maitrot, Mathilde, Has Microfinance Lost its Moral Compass? (November 20, 2014). Available at SSRN: https://ssrn.com/abstract=2560331 or http://dx.doi.org/10.2139/ssrn.2560331

David Hulme (Contact Author)

University of Manchester - Institute for Development Policy and Management (IDPM) ( email )

Manchester M13 9GH
United Kingdom

Mathilde Maitrot

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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