Social Investment through the Lens of Microfinance

Jonathan Morduch and Timothy Ogden
Chapter 1 in Marek Hudon, Marc Labie, and Ariane Szafarz (eds.) A Research Agenda for Financial Inclusion and Microfinance. Pages 12-26. Cheltenham, UK: Edward Elgar, 2019.

The reality of social investment can be messy. How could it not be? The aim is to support a new sort of capitalist endeavor driven by pursuit of social progress rather than just pursuit of profit. Yet modern history has been shaped by the tensions between unbridled capitalism and struggles for social and economic justice. Microfinance has been a laboratory for these developments, somehow embracing both market denialism and market fundamentalism, showing possibilities, limits, and conundrums. We reflect on four questions central to both “big ideas” and practical action: (1) How do user fees (including prices and interest rates) help and hurt customers and businesses? (2) How worrisome is mission drift, and why does it happen? (3) What is the role of subsidy? (4) How should social returns be measured?

Wagner Faculty