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Profits and outreach to the poor: The institutional logics of microfinance institutions

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Abstract

Few empirical studies have explored how microfinance institutions (MFIs) reach important social goals such as outreach to the poor. While MFIs have the dual goals of pursuing both social and economic values, the impact of their profitability on outreach can vary. Based on the institutional logics perspective, this study predicts that if MFIs follow commercial logic, they are more likely to pursue high profitability rather than to increase outreach; however, if MFIs follow social-welfare logic, they tend to tolerate relatively low profitability and try their best to extend outreach. Therefore, in the curve of distribution of MFIs’ profitability, there is an inverted U-shaped relationship between MFIs’ profitability and outreach to the poor. This relationship is further influenced by a state-level institution—the rule of law. For our empirical analyses, we use a data set of 3,785 organization-year observations from 1,129 MFIs across 98 countries. The results of multilevel mixed models are consistent with our predictions.

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Notes

  1. http://www.nobelprize.org/nobel_prizes/peace/laureates/2006/yunus-lecture-en.html (accessed Sept. 30, 2014).

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    http://online.wsj.com/news/articles/SB10001424127887323539804578261780648285770.

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Acknowledgments

An earlier version of this manuscript was presented at the Babson College Entrepreneurship Research Conference (BCERC) in 2014. We thank conference participants for constructive comments. We also thank the editors of this Special Issue, Garry D. Bruton, David Ahlstrom, and Steven Si, as well as Rae Pinkham and two anonymous reviewers for their excellent guidance. The authors also thank Y. Lisa Zhao and Chao Guo for their helpful discussion and Marc Ahlstrom of Burlington County College for his editorial assistance. This research was supported by Bloch School Kemper Summer Research Fund at the University of Missouri-Kansas City.

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  1. Henry W. Bloch School of Management, University of Missouri - Kansas City, 5100 Rockhill Road, Kansas City, MO, 64110-2499, USA

    Junyon Im & Sunny Li Sun

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Im, J., Sun, S.L. Profits and outreach to the poor: The institutional logics of microfinance institutions. Asia Pac J Manag 32, 95–117 (2015). https://doi.org/10.1007/s10490-014-9398-4

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