Profiting from Poverty: Ethical Dilemmas for Microfinance Institutions (MFIs) in Base of Pyramid (BOP) Markets
Linda M. Sama and R. Mitch Casselman, The Peter J. Tobin College of Business, Department of Management
This paper examines the ethical dilemmas that emerge when offering microfinance services in BOP markets. As microfinance develops, goals of growth, financial self-sufficiency and operational efficiency have conflicted with goals of poverty alleviation and community outreach. Utilizing the ethical lenses of deontology, teleology, virtue ethics and moral relativism, the paper seeks to unpack the issues and impacts on different segments of the BOP market. The paper builds on prior research in the social responsibility and ethics of banking to highlight the specific stakeholder impacts facing MFIs in BOP markets. In general, many of the key dilemmas represent themselves in the extreme poverty segment of the BOP where commercial business models have the least traction. Finally, for each issue addressed, we look at the types of corrections that are made or called for through markets, government actions and civil society to respond to the negative impacts uncovered through our analysis. This discussion of potential interventions for the various stakeholders may ameliorate criticisms of MFIs, suggest opportunities for cross-sectoral partnerships and improve outreach to the poorest of the poor.