In recent years, in addition to financial and social objectives, the microfinance industry has started to look at its environmental bottom line. The objective of this paper is to identify why microfinance institutions (MFIs) decide to go green. Data was collected through a quantitative survey of 160 MFIs and qualitative semi-structured interviews of 23 MFIs’ top managers. Basing our analysis on the model of ecological responsiveness developed by Bansal and Roth (Acad Manag J 43(4):717–736, 2000), we discover that MFIs for which legitimation (stakeholder pressure) is the dominant driver tend to adopt a defensive approach and set up more superficial negative strategies to appear green. In contrast, MFIs for which social responsibility is the dominant driver tend to be more proactive and innovative and develop adapted financial and non-financial services to promote environmentally friendly practices.
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Cf participants’ feedbacks during the “Microfinance & Environment” panel at the European Microfinance Week 2009 and the Oxford University—CERMi “Microfinance & Environment” Learning Workshop in 2010.
The MIX Market (www.mixmarket.com) is a website that provides access to operational, financial and social performance information on more than 2,000 MFIs, covering over 92 million borrowers globally.
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The debate around the mission definition and the position between the minimalist and integrated approaches is not new in microfinance (Servet 2006). As highlighted by Labie (2005), such controversial debates around mission definition are actually typical of non-profit organizations, which pursue several simultaneous objectives and have to define their priorities, the missions that they want to handle themselves, and the ones that they would better leave to others.
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Microfinance Environmental Performance Index
Microfinance Information eXchange
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Annex: Details on the Qualitative Study Methodology
Annex: Details on the Qualitative Study Methodology
Selection of MFIs
In order to make sure that our analysis and model could be generalized to the microfinance sector, we opted for a theoretical sampling of interviewed MFIs. The objective was to have a very diverse sample of MFIs, in terms of size, location, age, social mission, financial performance, environmental engagement, etc., so that our analysis and model could be applicable across all types of MFIs (Eisenhardt 1989). In particular, it was important for our study to have some extreme cases: on the one hand, leaders that are strongly engaged in environmental management, and on the other hand, MFIs with a minimalist approach that totally refused to consider environmental issues. Thanks to this diversity of positions and profiles, we were able to identify the rationales and factors behind MFIs’ decision to go green (or not).
Researcher’s Position and Introduction to MFIs
When the MFIs’ representatives were contacted, I introduced myself as a researcher only, and never as a practitioner. This strategy was chosen to avoid bias in MFIs’ answers, since they could have changed their discourse, had they perceived me as a potential donor or technical assistance provider.
For the first interviews conducted, I had told MFIs’ representatives that I was doing research on microfinance and environmental issues. Then, I decided to be a bit less specific in the following interviews, and introduced myself as a researcher interested in sustainable development or in microfinance impact. The intention was to avoid as much as possible greenwashing discourses, by not mentioned beforehand the specific focus of the research.
Semi-structured interviews were conducted following the list of topics hereunder. The order in which the questions were asked and the types and number of questions were flexible. They were adapted as the interview was going on in order to fit the dynamics of the interview.
|Background information on the MFI||
What is the mission/vision of your MFI?|
When was it created?
Where do you operate? (country, regions, rural/urban areas)
What is the legal status of your MFI?
How many clients do you have?
What type of financial services do you offer? (credits, savings, others; group or individual loans, etc.)
Do you provide non-financial services? Which ones? To whom? How? Why?
Where do you get your funding from?
Break the ice|
Get an overview of the MFI when it was not previously known by the interviewer
Identify whether environmental protection is part of the MFI’s mission
Identify whether the MFI has a minimalist or integrated approach
Identify whether the MFI is dependent on donors’ and investors’ funding
|Microfinance clients and environmental issues||
In your opinion, do microfinance clients have an impact on the environment (in terms of pollution, degradation of natural resources, etc.)?|
To what extend? How? Why?
Is it only the case for some specific activities? Which ones?
Do you have activities that can have an impact of the environment in your portfolio? Which ones? What proportion of your portfolio do they represent?
In your opinion, are microfinance clients vulnerable to/affected by environmental risks?
In your opinion, are microfinance clients aware of environmental issues? Are they concerned by such issues?
|Perceptions on the importance of environmental issues for microfinance clients|
|MFIs role and responsibility regarding environmental issues||
Do you think that microfinance can increase or decrease environmental risks?|
Have you heard about the triple bottom line approach in MF? What do you think about it?
Do you think that MFIs have a role to play in environmental protection? In your opinion, should MFIs be involved in environmental management?
How? What could they do? With whom?
Should environmental issues be handled by MFIs or by other actors?
|Opinion on the role of MFIs in tackling an environmental bottom line|
|MFIs’ capacity to manage environmental issues||
In your opinion, do MFIs have the capacity to manage environmental issues?|
Can they help mitigate environmental risks?
Can they change clients’ environmental behaviours?
Do MFIs have the internal skills for that?
|Opinion on the capacity of MFIs to implement environmental management programs|
|Existing environmental programs/practices within the MFI||
Do you tackle some environmental issues within your MFI?|
Are you implementing environmental management programs?
What do you do? Which type of program?
When did you start?
How? Through partnerships?
Is it included in the MFIs’ procedures?
How did you train the MFI’s staff?
What results have you achieved? Do you measure them?
What constraints do you face?
|Identify actual practices|
|Motives for going green||
Why did your MFI decide to engage in environmental management?|
How did you come up with the idea of this environmental program?
What triggered the decision to go green? Why at that time?
Did the decision come from within your institution?
What benefits are there for an MFI to go green?
In your opinion, can environmental risks threaten your portfolio quality?
Do you think that green microfinance can provide your MFI with a competitive advantage?
Is there an economic interest in going green or is it too costly?
Understand what drove the MFI decision to go green, or what could drive it (in case of future projects)?|
Identify whether the MFI sees strategic benefits in going green (competitiveness motive)
|Role of investors and donors||
In your experience, are your donors and investors interested in these environmental issues? To what extend?|
Has any of your donors/investors put a requirement related to environmental management?
Did you decide to go green to answer donors/investors’ expectations?
|Identify potential pressures from stakeholders (legitimation motive)|
|Influence of peer MFIs||
Have you already heard of other MFIs (within your country or elsewhere) that are engaged in environmental management?|
Which ones? What do they do?
Did it give you ideas to engage in environmental management?
Are you planning to develop environmental management programs?|
Which type of program? How? When?
To analyze the data, I applied best practices in qualitative research as they are promoted by Miles and Huberman (1984, 1994) or by Eisenhardt (1989). In this perspective, I went through the following steps:
Transcription of the interviews: All interviews had been recorded after previous approval of the interviewees. In the days following each interview, I worked on transcribing them. It allowed me to have a good immersion in the data and to add some extra comments on the behaviour and intonation of the interviewee. Full recording and transcription of interviews is a guarantee that the data considered for analysis will be faithful to the original interview.
Triangulation of information: In addition to interviews, I reviewed MFIs’ websites, annual reports, ratings, and any other relevant document, in order to check the validity of the information provided by the interviewee. This triangulation of information allowed me in particular to identify “greenwashing” discourses and strengthen my analysis.
Coding of the interviews: In order to process my data, I followed Miles and Huberman (1994)’s technique of manual content analysis. I started with coding the interview transcriptions. Codes were not assigned to specific words but rather to units of meanings, which could be phrases, sentences, or even paragraphs. It was essential to look at units of meanings and not at words, for several reasons: words can have several meanings, interviews were conducted in three different languages (English, French and Spanish), most interviewees were not speaking in their mother tongue (which was Arabic, Tagalog, Bahasa, Chinese, etc.), and looking only at words could have been misleading because it would not allow identifying greenwashing discourses. Therefore, using a more “automatic” approach (and application) working on key words would have been misleading and would have resulted in overseeing some key elements in our interviews. We thus started by manually coding the transcriptions, using descriptive codes such as “APPROACH” (for minimalist or integrated positioning), “PRACTICE” (for environmental programs implemented by the MFI), “DONORS” (for perceptions regarding donors’ influence), or “MOTIVES” (for the motives expressed for going green). The coding was realized at several points in time, starting early in the study process, and codes were refined to become more analytical as we were collecting more data and progressing in our analysis.
Tabulation: Still following Miles and Huberman (1994)’s technique, we used tabular display to facilitate the analysis of our qualitative data. We built a matrix using our codes to cluster information around topics. For each topic, we had a first column that would synthesize the main information with a key word (for instance, for “PRACTICES”, we would have YES or NO) and a second column providing more detailed information and/or selected quotes. Such a display was useful to get a rapid overview of our data, while still keeping meaningful information thanks to the selected quotes. An extract of the matrix that we built (Excel spreadsheet) is presented below.
Cross-cases comparison and identification of patterns: The matrix enabled us to identify patterns and make contrasts and comparisons between MFIs. In particular, it helped us identify groups of MFIs sharing similar positions, rationales and characteristics.
Iterative process between literature, coding, tabulation, comparison: This data analysis process was not linear but went through numerous iterations, as it is recommended in the literature on qualitative research (Eisenhardt 1989; Miles and Huberman 1994). After a first round of coding, clustering and comparing, we confronted our results to the literature, which made us refine some of our analysis and assumptions, and go back to the transcriptions for a second round of coding, clustering and analyzing. As interviews were conducted between 2009 and 2011, we had time to multiply such iterative cycles where theory and data were constantly compared. This technique allowed us to start our analysis in an inductive approach, without pre-conceived theoretical expectations, and to progressively refine our data analysis in light of new theoretical insights. It also allowed us to identify a theoretical framework that was the most suitable to our study.
Closing of the study and analysis: We reached theoretical saturation at around 16 interviews. To make sure that we were not missing any key element, we still conducted additional interviews. As additional interviews were only bringing minimal incremental learning (we were observing patterns that we had already seen before), we decided to close our data collection and analysis after 23 interviews. According to Eisenhardt (1989), who recommends analyzing between four and ten cases, this would already represent quite a good sample for qualitative analysis. Key findings were presented to the 23 interviewees for their feedbacks and reactions. As none of them questioned our analysis and conclusions, we then considered that we had achieved maturity in our analysis.
Extract of the Data Analysis Matrix
|Approach (minimalist/integrated)||Does MF have a role to play in environmental management?||Role of investors and donors||Other topics…|
|MFI 1||Minimalist||No||“We are not interfering in what he is going to buy. We are giving them liquidity.”||Pressure||“It was the demand of the ILO”||…|
|MFI 2||Integrated||Yes||“Nosotros podriamos hacer mucho. […] Tenemos que hacer alianzas para poderlo concretar.”||Support||“Nos falta orientación.”||…|
|MFI 3||Minimalist||No||“The minimalist, is just giving the financing, that’s it. […] [MFI 3] is just a minimalist”||No role||Not dependent on investors||…|
|MFI 4||Integrated||Yes||“If microfinance helps them diversify away from dependence on nature, […] definitely microfinance can help them reduce or mitigate the effect on the environment. Or if microfinance can help them to finance solar energy.”||NA||…|
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Allet, M. Why Do Microfinance Institutions Go Green? An Exploratory Study. J Bus Ethics 122, 405–424 (2014). https://doi.org/10.1007/s10551-013-1767-2
- Corporate Social Responsibility
- Ecological responsiveness
- Environmental motivation
- Organizational decision making