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Microfinance and Social Investment

Author

Listed:
  • Jonathan Conning

    () (Hunter College and The Graduate Center, City University of New York, New York 10065)

  • Jonathan Morduch

    () (Wagner Graduate School of Public Service and the Financial Access Initiative, New York University, New York 10012)

Abstract

This review puts a corporate finance lens on microfinance. Microfinance aims to democratize global financial markets through new contracts, organizations, and technology. We explain the roles that government agencies and socially minded investors play in supporting the entry and expansion of private intermediaries in the sector, and we disentangle debates about competing social and commercial firm goals. We frame the analysis with theory that explains why microfinance institutions serving lower-income communities charge high interest rates, face high costs, monitor customers relatively intensively, and have limited ability to lever assets. The analysis blurs traditional dividing lines between nonprofits and for-profits and places focus on the relationship between target market, ownership rights, and access to external capital.

Suggested Citation

  • Jonathan Conning & Jonathan Morduch, 2011. "Microfinance and Social Investment," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 407-434, December.
  • Handle: RePEc:anr:refeco:v:3:y:2011:p:407-434
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-102710-144909
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    Citations

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    Cited by:

    1. Jayashankar, Priyanka & Ashta, Arvind & Rasmussen, Mark, 2015. "Slow money in an age of fiduciary capitalism," Ecological Economics, Elsevier, vol. 116(C), pages 322-329.
    2. Ismaira Contreras & Alicia Gómez, 2013. "Impact on the financial variables of the borrowers of AVANZAR in Buenos Aires, Argentina. Period 2000-2012," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 38(35), pages 11-56, January-j.
    3. Widiarto, Indra & Emrouznejad, Ali, 2015. "Social and financial efficiency of Islamic microfinance institutions: A Data Envelopment Analysis application," Socio-Economic Planning Sciences, Elsevier, vol. 50(C), pages 1-17.
    4. Mark Pauly & Ashley Swanson, 2013. "Social Impact Bonds in Nonprofit Health Care: New Product or New Package?," NBER Working Papers 18991, National Bureau of Economic Research, Inc.
    5. Ian Carrillo, 2013. "The successes and challenges of microfinance," Chapters,in: Handbook of Rural Development, chapter 11, pages i-ii Edward Elgar Publishing.
    6. Bauchet, Jonathan & Morduch, Jonathan, 2013. "Is Micro too Small? Microcredit vs. SME Finance," World Development, Elsevier, vol. 43(C), pages 288-297.

    More about this item

    Keywords

    corporate governance; microcredit; social entrepreneurship; leverage; prosocial behavior;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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