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To whom should we be fair? Ethical issues in Balancing Stakeholder Interests from Banco Compartamos Case Study

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Author Info

  • Arvind Ashta
  • Marek Hudon

Abstract

In the world of microfinance, interest rate ethics is an important issue, thrown into the limelight by the Initial Public Offering of Compartamos which resulted in millions of dollars of gains, some of which found their way into private pockets. These high gains were based on high interest rates, raising ethical questions. The paper then uses a stakeholder analysis to explain the interests of different stakeholders in this case and present that fairness to one group of stakeholders is often at the expense of another group. We take the position that in this case, specifically, the firm objectives could have been met without such ethical trade-offs. The specifics of the case are then generalised to all NGOs participating in for-profit firms.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 09-036.RS.

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Length: 34 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:09-036

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Keywords: Agency problem; business ethics; fairness; governance; microfinance; stakeholder;

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References

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  1. Arvind Ashta, 2009. "Microcredit Capital Flows and Interest Rates: An Alternative Explanation," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 43(3), pages 661-684, September.
  2. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
  3. Zeller, Manfred & Meyer, Richard L., 2002. "The triangle of microfinance," Food policy statements 40, International Food Policy Research Institute (IFPRI).
  4. Annabel Vanroose, 2008. "What macro factors make microfinance institutions reach out?," Working Papers CEB 08-036.RS, ULB -- Universite Libre de Bruxelles.
  5. Marek Hudon, 2009. "Should access to credit be a right?," ULB Institutional Repository 2013/14210, ULB -- Universite Libre de Bruxelles.
  6. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006. "Financial performance and outreach : a global analysis of leading microbanks," Policy Research Working Paper Series 3827, The World Bank.
  7. Stephen Brammer & Andrew Millington, 2004. "The Development of Corporate Charitable Contributions in the UK: A Stakeholder Analysis," Journal of Management Studies, Wiley Blackwell, vol. 41(8), pages 1411-1434, December.
  8. Niels Hermes & Robert Lensink, 2007. "The empirics of microfinance: what do we know?," Economic Journal, Royal Economic Society, vol. 117(517), pages F1-F10, 02.
  9. Hermes, Niels & Lensink, Robert & Mehrteab, Habteab T., 2005. "Peer Monitoring, Social Ties and Moral Hazard in Group Lending Programs: Evidence from Eritrea," World Development, Elsevier, vol. 33(1), pages 149-169, January.
  10. Roy Mersland & Reidar Øystein Str�m, 2008. "Performance and trade-offs in Microfinance Organisations-does ownership matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(5), pages 598-612.
  11. Constant Mews & Ibrahim Abraham, 2007. "Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective," Journal of Business Ethics, Springer, vol. 72(1), pages 1-15, April.
  12. Hartarska, Valentina M., 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists.
  13. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, December.
  14. Marc Labie & Anaïs Périlleux, 2008. "Corporate governance in microfinance: credit unions," Working Papers CEB 08-003.RS, ULB -- Universite Libre de Bruxelles.
  15. Copestake, James, 2007. "Mainstreaming Microfinance: Social Performance Management or Mission Drift?," World Development, Elsevier, vol. 35(10), pages 1721-1738, October.
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Citations

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Cited by:
  1. Tzu-Kuan Chiu, 2014. "Putting Responsible Finance to Work for Citi Microfinance," Journal of Business Ethics, Springer, vol. 119(2), pages 219-234, January.
  2. Szafarz, Ariane & Brière, Marie, 2011. "Investment in Microfinance Equity : Risk, Return, and Diversification Benefits," Economics Papers from University Paris Dauphine 123456789/7858, Paris Dauphine University.
  3. Beatriz Armendariz & Ariane Szafarz, 2011. "On Mission Drift in Microfinance Institutions," ULB Institutional Repository 2013/97387, ULB -- Universite Libre de Bruxelles.
  4. Marek Hudon & Anaïs Périlleux, 2011. "Performance Management of Double Bottom Line Institutions: Evidence from Banco Compartamos’s Productivity Distribution," Working Papers CEB 11-056, ULB -- Universite Libre de Bruxelles.
  5. Marco Tavanti, 2013. "Before Microfinance: The Social Value of Microsavings in Vincentian Poverty Reduction," Journal of Business Ethics, Springer, vol. 112(4), pages 697-706, February.

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