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

Listed author(s):
  • Kent, Derin
  • Dacin, M. Tina
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0883902613000335
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    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 28 (2013)
    Issue (Month): 6 ()
    Pages: 759-773

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    Handle: RePEc:eee:jbvent:v:28:y:2013:i:6:p:759-773
    DOI: 10.1016/j.jbusvent.2013.03.002
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbusvent

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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, July.
    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, 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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