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Bankers at the gate: Microfinance and the high cost of borrowed logics

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  • Kent, Derin
  • Dacin, M. Tina

Abstract

In this paper we examine how the interaction between influences of commercial banking and poverty alleviation shaped the evolution of modern microfinance. Using institutional theory as a lens, we observe that the commercial banking logic increasingly displaced the microfinance field's foundational poverty alleviation and development principles over time. We argue that this process of displacement can occur inadvertently as organizations that embody multiple logics draw disproportionately on only one of those logics when developing legitimating accounts of their activity to stakeholders. Furthermore, we introduce the concept of permeability – the extent to which the elements of a logic are ambiguous and loosely coupled – to explain why some logics may be more or less open to the influence of other logics. We conclude by discussing implications for entrepreneurship and poverty alleviation more generally.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jbvent:v:28:y:2013:i:6:p:759-773
    DOI: 10.1016/j.jbusvent.2013.03.002
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    References listed on IDEAS

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    1. Beatriz Armendáriz & Jonathan Morduch, 2010. "The Economics of Microfinance, Second Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262014106, January.
    2. Anis Chowdhury, 2009. "Microfinance as a Poverty Reduction Tool—A Critical Assessment," Working Papers 89, United Nations, Department of Economics and Social Affairs.
    3. Tchakoute-Tchuigoua, Hubert, 2010. "Is there a difference in performance by the legal status of microfinance institutions?," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 436-442, November.
    4. Jay K. Rosengard, 2004. "Banking on Social Entrepreneurship : The Commercialization of Microfinance," Mondes en développement, De Boeck Université, vol. 126(2), pages 25-36.
    5. Hermes, Niels & Lensink, Robert & Meesters, Aljar, 2011. "Outreach and Efficiency of Microfinance Institutions," World Development, Elsevier, vol. 39(6), pages 938-948, June.
    6. Monzurul Hoque & Muhammad Chishty & Rashid Halloway, 2011. "Commercialization and changes in capital structure in microfinance institutions: An innovation or wrong turn?," Managerial Finance, Emerald Group Publishing, vol. 37(5), pages 414-425, April.
    7. Khawari, Aliya, 2004. "Microfinance: Does it hold its promises? A survey of recent literature," HWWA Discussion Papers 276, Hamburg Institute of International Economics (HWWA).
    8. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    9. 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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    Cited by:

    1. Knar Khachatryan & Emma Avetisyan, 2017. "Microfinance development in Armenia: Sectoral characteristics and problems," Post-Print hal-01695638, HAL.
    2. Tchakoute Tchuigoua, Hubert, 2016. "Buffer capital in microfinance institutions," Journal of Business Research, Elsevier, vol. 69(9), pages 3523-3537.
    3. repec:eee:wdevel:v:100:y:2017:i:c:p:1-15 is not listed on IDEAS
    4. repec:kap:jbuset:v:143:y:2017:i:3:d:10.1007_s10551-015-2768-0 is not listed on IDEAS
    5. Bruton, Garry D. & Ketchen, David J. & Ireland, R. Duane, 2013. "Entrepreneurship as a solution to poverty," Journal of Business Venturing, Elsevier, vol. 28(6), pages 683-689.
    6. repec:spr:grdene:v:27:y:2018:i:3:d:10.1007_s10726-018-9564-z is not listed on IDEAS
    7. Camille Meyer & Marek Hudon, 2017. "Alternative organizations in finance: commoning in complementary currencies," Working Papers CEB 17-015, ULB -- Universite Libre de Bruxelles.
    8. repec:bla:ecorec:v:93:y:2017:i:300:p:112-141 is not listed on IDEAS
    9. Gras, David & Nason, Robert S., 2015. "Bric by bric: The role of the family household in sustaining a venture in impoverished Indian slums," Journal of Business Venturing, Elsevier, vol. 30(4), pages 546-563.
    10. repec:eee:wodepe:v:4:y:2016:i:c:p:24-29 is not listed on IDEAS
    11. Joshua K Ault, 2016. "An institutional perspective on the social outcome of entrepreneurship: Commercial microfinance and inclusive markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(8), pages 951-967, October.
    12. Chliova, Myrto & Brinckmann, Jan & Rosenbusch, Nina, 2015. "Is microcredit a blessing for the poor? A meta-analysis examining development outcomes and contextual considerations," Journal of Business Venturing, Elsevier, vol. 30(3), pages 467-487.

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    Keywords

    Microfinance; Institutional theory; Poverty;

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