Profiting from poverty: ethics of microfinance in BOP

Abstract

PurposeThis paper seeks to examine the ethical dilemmas that emerge when offering microfinance services in BOP markets.Design/methodology/approachUtilizing the ethical lenses of deontology, teleology, virtue ethics and moral relativism, the paper builds on prior research on ethical issues in BOP markets and the ethics of microfinance to highlight the specific stakeholder impacts facing MFIs. Relevant literature and examples from practice are utilized to illustrate the different ethical perspectives.FindingsIn general, many of the key dilemmas represent themselves in the extreme poverty segment of the BOP where commercial business models have the least traction.Research limitations/implicationsPropositions are developed for the corrective actions in the paper which might allow future research to uncover differences in intervention success in different BOP markets.Practical implicationsThe discussion of potential interventions for the various stakeholders may ameliorate criticisms of MFIs, suggest opportunities for cross‐sectoral partnerships and improve outreach to the poorest of the poor.Social implicationsFor each issue addressed, this paper looks at the types of corrections that are made or called for through markets, government actions and civil society to respond to the negative impacts uncovered through our analysis.Originality/valueThe analysis in this paper contributes to the theoretical ethical literature with a very specific application to an emerging concern in the field of microfinance. It also offers prescriptive scenarios for industry and public policy makers. It challenges the ethics underlying businesses that wish to target the full spectrum of Base of Pyramid participants.