What is a Fair Level of Profit for Social Enterprise? Insights from Microfinance
Journal of Business Ethics 162 (3):627-644 (2020)
Abstract
Although microfinance organizations are generally considered as inherently ethical, recent events have challenged the legitimacy of the sector. High interest rates and the excessive profitability of some market leaders have raised the question of how to define a fair profit level for social enterprise. In this article, we construct a fair profit framework based on four dimensions: profitability, social mission, pricing, and surplus distribution. We then apply this framework using an empirical sample of 496 microfinance institutions. Results indicate that satisfying all four criteria is a difficult, although not impossible, task. According to our framework, 24 MFIs emerge as true double bottom line organizations. These MFIs are characterized by higher outreach to women, lower portfolio risk, and higher productivity in high-density environments such as South Asia. We argue that excessive profits can be better understood relative to pricing, the outreach of the MFI, and organizational commitment to clients in the form of reduced interest rates.My notes
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Citations of this work
Measuring Social Performance in Social Enterprises: A Global Study of Microfinance Institutions.Leif Atle Beisland, Kwame Ohene Djan, Roy Mersland & Trond Randøy - 2021 - Journal of Business Ethics 171 (1):51-71.
Business or Basic Needs? The Impact of Loan Purpose on Social Crowdfunding Platforms.Hadar Gafni, Marek Hudon & Anaïs Périlleux - 2020 - Journal of Business Ethics 173 (4):777-793.
Resource Scarcity and Humanitarian Social Innovation: Observations from Hunger Relief in the Context of the COVID-19 Pandemic.Iana Shaheen, Arash Azadegan & Donna F. Davis - 2023 - Journal of Business Ethics 182 (3):597-617.
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