Commercial Microfinance and Social Responsibility: A Critique
This paper discusses the inadequacies of commercial microfinance. The strategic focus of Indian microfinance seems to have shifted from poor borrowers to profits as MFIs need to maximize investor returns. There is an apprehension that commercialization would eventually undermine MFIs’ role of social value creation.
The paper states that current trends in the development of the Indian microfinance sector indicate:
- Rise in profit-seeking MFI promoters;
- Progressive marginalization of poor microfinance clients;
- Increasing influence of investor interests in the governance and monitoring of transformed MFIs;
- Concern among stakeholders that unbridled growth and over-lending may land the industry in a delinquency crisis;
- MFI experience of client indifference and non-cooperation.
Concerted efforts are needed to retain the social mission in microfinance. There is a need to go beyond techniques and tools that ensure patronage of investors, but do not always signal real development outcomes. MFIs need to clarify and endorse their responsibility towards the communities whose future they are trying to shape in order to achieve these outcomes.
