The role of social performance in microfinance investment decisions
Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
ISBN: 978-1-78190-770-2, eISBN: 978-1-78190-771-9
Publication date: 31 December 2013
Abstract
Purpose – These last three years, the global reputation of microfinance has been damaged by some major crises, notably in India. The Microfinance Investment Vehicles (MIVs), funded by public money and socially inclined investors, are believed by observers to be part of the causes of the crises (von Stauffenberg & Rozas, 2011). As a consequence, they now have to demonstrate their commitment to the social mission of microfinance. This chapter aims at putting forward the debate on MIVs’ ability to effectively contribute to the social mission of microfinance by analyzing how they integrate social performance in their investment decisions.
Methodology/approach – Analysis of interviews with microfinance fund managers based on a framework of recognized impediments to a socially responsible approach in investing.
Findings – While social performance is recognized by respondents to be an important topic for the industry, fund managers still do not give a strong role to social criteria in investment decisions. The findings of the qualitative analysis in the chapter demonstrate that this is linked to a number of major impediments such as the tendency to believe that microfinance is social per se, the lack of standardization in social performance tools, and also a loose regulation regarding social reporting.
Research limitations/implications – The findings of the study are limited due to the relatively small sample size and the focus on fund managers’ answers only. Future research could investigate the viewpoints of different stakeholders in the investment process, such as the back investors of microfinance funds or the regulatory institutions.
Originality/value – To the best of our knowledge, this is the first attempt to get insights on the impediments to a stronger focus on social performance by MIVs, with the application of a recognized framework from the Socially Responsible Investment (SRI) literature.
Keywords
Acknowledgements
Acknowledgments
The author would like to thank the ALFI for funding and supporting this research, in particular Tomas Seale, Jean-Luc Neyens, and Laetitia Hamon who have greatly supported the project. The author would also like to thank LuxFlag for their help in contacting the participants to the study.
The author is also thankful to the organizers of the First CR3 Conference (April 2011, Helsinki) and to the convenors of the SRI stream for their useful insights on the first version of the paper, and to colleagues from the Center for European Research on Microfinance and from the Warocqué School of Business and Economics who also helped a lot with their comments and suggestions.
Finally, the author is grateful to the two anonymous reviewers for their useful input that made this publication possible.
Citation
Urgeghe, L. (2013), "The role of social performance in microfinance investment decisions", Institutional Investors’ Power to Change Corporate Behavior: International Perspectives (Critical Studies on Corporate Responsibility, Governance and Sustainability, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 309-337. https://doi.org/10.1108/S2043-9059(2013)0000005021
Publisher
:Emerald Group Publishing Limited
Copyright © 2013 Emerald Group Publishing Limited