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Banking on Social Entrepreneurship : The Commercialization of Microfinance

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  • Jay K. Rosengard

Abstract

Two seemingly separate disciplines, social entrepreneurship and sustainable microfinance, have both matured and converged over the past two decades, so that the latter has become a dramatic example of the successful application of the former. Sustainable microfinance demonstrates that banks and commercially oriented NGOs can ?do well by doing good? : they can generate considerable profit while at the same time have a significant positive development impact. Sustainable microfinance institutions are innovative creators of social value in that they pursue business opportunities where financial performance and social impact complement rather than compete with each other. They apply conventional banking precepts in an unconventional manner, creating commercially viable financial institutions that double as social change agents. Despite the many opportunities presented by scaling down or scaling up, there is still a vital role for non-commercialized microfinance. It is essential to match the appropriate institutional model, whether a bank, finance company, membership-based organization, or subsidized NGO, with the microfinance organization?s mission. The guiding principles should be institutional diversification, product differentiation, and market segmentation.

Suggested Citation

  • Jay K. Rosengard, 2004. "Banking on Social Entrepreneurship : The Commercialization of Microfinance," Mondes en développement, De Boeck Université, vol. 126(2), pages 25-36.
    • Handle: RePEc:cai:meddbu:med_126_0025
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    References listed on IDEAS

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    1. Patten, Richard H. & Rosengard, Jay k. & Johnston, Don JR., 2001. "Microfinance Success Amidst Macroeconomic Failure: The Experience of Bank Rakyat Indonesia During the East Asian Crisis," World Development, Elsevier, vol. 29(6), pages 1057-1069, June.
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    Cited by:

    1. Kent, Derin & Dacin, M. Tina, 2013. "Bankers at the gate: Microfinance and the high cost of borrowed logics," Journal of Business Venturing, Elsevier, vol. 28(6), pages 759-773.
    2. Shahzad Khurram & Sandra Charreire Petit, 2017. "Investigating the Dynamics of Stakeholder Salience: What Happens When the Institutional Change Process Unfolds?," Journal of Business Ethics, Springer, vol. 143(3), pages 485-515, July.
    3. Tristan Caballero-Montes, 2023. "Integrating market conditions into regulatory decisions on microfinance interest rates: does competition matter?," Annals of Finance, Springer, vol. 19(2), pages 201-232, June.
    4. Patrick Reichert, 2018. "A meta-analysis examining the nature of trade-offs in microfinance," Oxford Development Studies, Taylor & Francis Journals, vol. 46(3), pages 430-452, July.
    5. Sefa Awaworyi Churchill, 2020. "Microfinance financial sustainability and outreach: is there a trade-off?," Empirical Economics, Springer, vol. 59(3), pages 1329-1350, September.
    6. Emmanuel Ofori & Kenichi Kashiwagi, 2022. "Impact of Microfinance on the Social Performance of Local Households: Evidence from the Kassena Nankana East District of Ghana," Sustainability, MDPI, vol. 14(10), pages 1-25, May.
    7. Gashaw Tadesse Abate & Carlo Borzaga & Carlo Borzaga, 2014. "Cost efficiency and outreach of microfinance institutions in Ethiopia: Do they contrast with financial cooperatives?," Euricse Working Papers 1465, Euricse (European Research Institute on Cooperative and Social Enterprises).

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