Norms and values of the various microfinance institutions

Abstract

PurposeThe paper aims to study the role of norms and values in the microfinance sector.Design/methodology/approachThe paper provides a combination of narrative with argument and analysis.FindingsA classification of the sector is proposed, mapping the institutions along two axes: the profit motive (profit vs not‐for‐profit) and the decision‐making style (centralized vs un‐centralized). Some microfinance institutions base their interactions on rigid norms or rules; while others are based on values. It is argued that the private sector will tend to produce the operating rules of the microfinance system while the not‐for‐profit institutions that are using an inclusive decision‐making process are more likely to influence the ethical norms in the sector. Nevertheless, this classification is not static as recent events in South‐India shows that norms, such as the interest rates, can be politically and emotionally invested to the point that they are about to become values in the sector.Originality/valueThe conclusions drawn help in understanding the interactions between the various actions in microfinance. Exploiting the full range of the possibilities of those different structures may be valuable for a fully successful development in India.