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Profiting from poverty: ethics of microfinance in BOP

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Purpose ‐ This paper seeks to examine the ethical dilemmas that emerge when offering microfinance services in BOP markets. Design/methodology/approach ‐ Utilizing 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. Findings ‐ In 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/implications ‐ Propositions 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 implications ‐ The 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 implications ‐ For 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/value ‐ The 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.
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Keywords: Base of pyramid; Ethical dilemma; Ethical philosophies; Ethics; Microfinance; Poverty

Document Type: Research Article

Publication date: March 1, 2013

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