TY - JOUR
T1 - On Ethical Violations in Microfinance Backed Small Businesses
T2 - Family and Household Welfare
AU - Nilakantan, Rahul
AU - Iyengar, Deepak
AU - Datta, Samar K.
AU - Rao, Shashank
N1 - Publisher Copyright:
© 2020, Springer Nature B.V.
PY - 2021/9
Y1 - 2021/9
N2 - The microfinance business model focuses largely on lending to the woman in the household, rather than the man. The belief is that women are more trustworthy borrowers than men, and that lending to women may have increased social impact. Yet in several cases, women do not have control over the loan backed business despite being the borrower of record. Such takeover of the business by the man constitutes an ethical violation. We find that high dependency ratios in the family are correlates of such ethical violations. Further, we also find that ethical violations have a significant economic cost, consistent with prior scholarship in the family-business domain. While access to microfinance increases household welfare, this beneficial impact reduces by over 50% in the presence of an ethical violation. Our results suggest that microfinance lenders need to move beyond the traditional role of just being a lender to providing advice on issues like family planning, and money management, and enforcement, thus moving closer to the solidarity economy paradigm of integrating savings and credit into broader canvases of social relationships and social structures.
AB - The microfinance business model focuses largely on lending to the woman in the household, rather than the man. The belief is that women are more trustworthy borrowers than men, and that lending to women may have increased social impact. Yet in several cases, women do not have control over the loan backed business despite being the borrower of record. Such takeover of the business by the man constitutes an ethical violation. We find that high dependency ratios in the family are correlates of such ethical violations. Further, we also find that ethical violations have a significant economic cost, consistent with prior scholarship in the family-business domain. While access to microfinance increases household welfare, this beneficial impact reduces by over 50% in the presence of an ethical violation. Our results suggest that microfinance lenders need to move beyond the traditional role of just being a lender to providing advice on issues like family planning, and money management, and enforcement, thus moving closer to the solidarity economy paradigm of integrating savings and credit into broader canvases of social relationships and social structures.
KW - Bottom of pyramid
KW - Ethical violations
KW - Microfinance
UR - http://www.scopus.com/inward/record.url?scp=85083362867&partnerID=8YFLogxK
U2 - 10.1007/s10551-020-04499-0
DO - 10.1007/s10551-020-04499-0
M3 - Article
AN - SCOPUS:85083362867
SN - 0167-4544
VL - 172
SP - 785
EP - 802
JO - Journal of Business Ethics
JF - Journal of Business Ethics
IS - 4
ER -