The Ethical Dimension of Microfinance

This paper discusses the ethical problems associated with microfinance.

The social goal pursued by microfinance gave it an aura of respectability. Recently, however, critics have questioned the high interest rates charged by MFIs, the disappearance of joint liability and the increasing focus of MFIs on economic sustainability, which might lead them away from their social function and ethical content. The paper states that:

• Microfinance is based on an ethically correct motivation;
• If applied with prudence, honesty and reasonableness, microfinance deserves a positive ethical appraisal;
• Microfinance is also positive when judged by its personal, social and economic effects.

The paper stresses that there is no point in opposing sustainability to outreach, or in defending a fundamentalist attitude about what a microfinance program is and should be. Ultimately, it is the institution itself that is responsible for this decision, and it will have to consider its mission and goals, limiting factors, intentions of its funders and clients, competitors' strategies and constraints of the legal and institutional environments in which it operates.