Microfinance : are there ethical differences between different Norwegian microfinance institutions based on their ownership types?

Abstract

Microfinance is an exciting and interesting topic that lacks an extensive amount of research. Microfinance has been more and more commercialized over the last years, but few have written about the absolute effect of microfinance. Can microfinance really be the answer to the poverty in the world or is it just a social trend? The motivation for this master thesis was the diversity of the good and negative publicity about microfinance before and after the documentary “Caught in Micro Debt” that was aired on NRK the 30 November 2010. I wanted to extend my knowledge within the field of microfinance and find out the “truth” about this topic. Are microfinance helping people to climb out of poverty or is it hurting people by charging high interest rates and making them become debt slaves? This thesis aims at explaining the ethical differences between for-profit and non-profit microfinance institutions. The differences are investigated and discussed on basis of the different Norwegian microfinance institutions; Kolibri Capital, Mission Alliance (Alliance Microfinance), Norfund, Norwegian Microfinance Initiative and Strømme foundation (Strømme Microfinance) . I have chosen to exclude insurance and savings and to only focus on microfinance in the form of microloan. Ethical differences are in this thesis explained from; 1) Customer segment; whether or not the microfinance institutions lend to women and people living in rural areas. 2) If the organization aims at making a profit on microfinance or not, and the size of this profit. 3) If the institutions provide education to their borrowers, e.g. teach them how to read and write, basic accounting, etc. The thesis reveals that there are some ethical differences between the for-profit and non-profit organizations based on their customer segment, customer outreach, profit margin and education and training that is included with the loan.