Skip to main content
SpringerLink
Log in

A Study of Codes of Ethics for Mexican Microfinance Institutions

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Most scholarly interest in codes of ethics or conduct has focused on traditional companies. Little is known about the codes of social enterprises or hybrid organizations such as microfinance institutions (MFIs). Our paper provides a comparative case study of the codes of a Mexican microfinance network and seven MFIs. Using the corporate integrity model, we analyze the content of MFIs’ codes compared to those of traditional organizations. We then examine to what extent some specific features of MFIs such as their mission, target group, and applied credit methodologies, are factors that determine the content of their code. We find that MFIs’ codes, like those of traditional companies, include traditional stakeholder principles. Nevertheless, they put greater emphasis on ‘socially-oriented’ principles or on terms such as ‘people’ and ‘common good’. MFIs’ codes differ with respect to the items they include and exclude and the size of the covered sections. We also find that these codes attempt to address prevailing concerns in microfinance but rarely tackle two critical debates, namely levels of interest rates and of profitability. We finally argue that it is difficult to move toward a global code, owing to regional disparities and the variety of organizational models and missions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The Pocantico declaration was issued in April 2008 by a group of managers of MFIs, investors, and donors from a variety of nations.

  2. Some authors even refer to the triple bottom line of MFIs, including an environmental performance (Allet and Hudon 2013).

  3. All figures are as at end December 2012 from the MIX Market.

  4. It is, however, well known that it is very difficult for microborrowers, who are often illiterate, to understand the full costs of microcredit, or the effective interest rates. On top of interest rates, it also includes some elements such as fees or mandatory savings. Moreover, many MFIs, such as Compartamos, charge “flat” interest rates which means that interests are calculated on the full amount even if the outstanding loans decline. This actually doubles the effective interest rates (Roodman 2012).

References

  • Agier, I., & Szafarz, A. (2013). Microfinance and gender: Is there a glass ceiling on loan size? World Development, 42, 165–181.

    Article  Google Scholar 

  • Ahmed, S. (2009). Microfinance institutions in Bangladesh: achievements and challenges. Managerial Finance, 35(12), 999–1010.

    Article  Google Scholar 

  • Allet, M., & Hudon, M. (2013). Green microfinance: Characteristics of microfinance institutions involved in environmental management. Journal of Business Ethics. doi:10.1007/s10551-013-1942-5.

  • Alter, K. (2007). Social enterprise typology. Seattle: Virtue Ventures LLC. Retrieved May 7, 2013, from http://www.4lenses.org/setypology.

  • Armendáriz, B., & Morduch, J. (2005). The economics of Microfinance (1st ed.). MIT Press.

  • Armendáriz, B., & Morduch, J. (2010). The economics of microfinance (2nd ed.). Cambridge, MA: The MIT Press.

    Google Scholar 

  • Arnold, D. G., Audi, R., & Zwolinski, M. (2010). Recent work in ethical theory and its implications for business ethics. Business Ethics Quarterly, 20(4), 559–581.

    Article  Google Scholar 

  • Ashta, A., & Hudon, M. (2012). The compartamos microfinance IPO: Mission conflicts in hybrid institutions with diverse shareholding. Strategic Change (briefings in entrepreneurial finance), 21(7/8), 331–341.

    Article  Google Scholar 

  • Battilana, J., & Dorado, S. (2010). Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal, 53(6), 1419–1440.

    Article  Google Scholar 

  • Blok, V. (2013). The power of speech acts: Reflections on a performative concept of ethical oaths in ecnomics and business. Review of Social Economy, 71(2), 187–208.

    Article  Google Scholar 

  • Bondy, K., Matten, D., & Moon, J. (2004). The adoption of voluntary codes of conduct in MNCs: A three-country comparative study. Business and Society Review, 109(4), 449–477.

    Article  Google Scholar 

  • Cassell, C., Johnson, P., & Smith, K. (1997). Opening the black box: Corporate codes of ethics in their organizational context. Journal of Business Ethics, 16(10), 1077–1093.

    Article  Google Scholar 

  • Chiu, T.-K. (2014). Putting responsible finance to work for citi microfinance. Journal of Business Ethics, 119(2), 219–234.

  • Chonko, L. B., Wotruba, T. R., & Loe, T. W. (2003). Ethics code familiarity and usefulness: Views on idealist and relativist managers under varying conditions of turbulence. Journal of Business Ethics, 42(3), 237–252.

    Article  Google Scholar 

  • Copestake, J. (2007). Mainstreaming microfinance: Social performance management or mission drift? World Development, 35(10), 1721–1738.

    Article  Google Scholar 

  • Cornelius, N., Todres, M., Janjuha-Jivraj, S., Woods, A., & Wallace, J. (2008). Corporate social responsibility and the social enterprise. Journal of Business Ethics, 81(2), 355–370.

    Article  Google Scholar 

  • Crane, A., & Matten, D. (2010). Business ethics: Managing corporate citizenship and sustainability in the age of globalization (2nd ed.). New York: Oxford University Press.

    Google Scholar 

  • Cull, R., Demirgūç-Kunt, A., & Morduch, J. (2009). Microfinance meets the market. Journal of Economic Perspectives, 23(1), 167–192.

    Article  Google Scholar 

  • de Bruin, B., & Dolfsma, W. (2013) Oaths and codes in economics and business—introducing the special issue. Review of Social Economy, 71(2), 135–139.

  • de Sousa-Shields, M. (2008). Microfinance and the double bottom line in the post-social enterprise era. microReport #112. Washington, DC: USAID.

    Google Scholar 

  • Defourny, J., & Nyssens, M. (2008). Social enterprise in Europe: Recent trends and developments. Social Enterprise Journal, 4(3), 202–228.

    Article  Google Scholar 

  • DeMartino, G. (2013). Epistemic aspects of economic practice and the need for professional economic ethics. Review of Social Economy, 71(2), 166–186.

    Article  Google Scholar 

  • Department of Trade and Industry. (2002). Social enterprise: A strategy for success. London: Department of Trade and Industry. Retrieved May 7, 2013, from http://www.seeewiki.co.uk/~wiki/images/5/5a/SE_Strategy_for_success.pdf.

  • Dileo, P. (2011). Repositioning microfinance with impact investors: Codes of conduct and ‘social first’ MFIs. Enterprise Development and Microfinance, 22(4), 276–290.

    Article  Google Scholar 

  • Drake, D., & Rhyne, E. (2002). The commercialization of microfinance: Balancing business and development. Bloomfield, CT, USA: Kumarian.

    Google Scholar 

  • Economist Intelligence Unit. (2012). Global microscope on the microfinance business environment 2012. London: The Economist.

    Google Scholar 

  • Erwin, P. M. (2011). Corporate codes of conduct: The effects of coe content and quality on ethical performance. Journal of Business Ethics, 99(4), 535–548.

    Article  Google Scholar 

  • Fernando, N. (2006). Understanding and dealing with high interest rates on microcredit. Manila: Asian Development Bank.

    Google Scholar 

  • Forster, M., Loughran, T., & McDonald, B. (2009). Commonality in codes of ethics. Journal of Business Ethics, 90(2), 129–139.

    Article  Google Scholar 

  • Frankel, M. S. (1989). Professional codes: Why, how, and with what impact? Journal of Business Ethics, 8(2/3), 109–115.

    Article  Google Scholar 

  • Ghate, P. (2007). Consumer protection in indian microfinance: Lessons from Andhra Pradesh and the microfinance bill. Economic and Political Weekly, 42(13), 1176–1184.

    Google Scholar 

  • Giné, X., Jakiela, P., Karlan, D., & Morduch, J. (2010). Microfinance games. American Economic Journal: Applied Economics, 2(3), 60–95.

    Google Scholar 

  • Gordon, K., & Miyake, M. (2001). Business Approaches to combating bribery: A study of codes of conduct. Journal of Business Ethics, 34(3/4), 161–173.

    Article  Google Scholar 

  • Gutiérrez-Nieto, B., Serrano-Cinca, C., & Molinero, C. M. (2007). Microfinance institutions and efficiency. Omega (international journal of management science), 2, 131–142.

    Article  Google Scholar 

  • Helin, S., & Sandström, J. (2007). An inquiry into the study of corporate codes of ethics. Journal of Business Ethics, 75(3), 253–271.

    Article  Google Scholar 

  • Hudon, M. (2009). Should access to credit be a right? Journal of Business Ethics, 84, 17–28.

    Article  Google Scholar 

  • Hudon, M., & Ashta, A. (2013). Fairness and microcredit interest rates: From Rawlsian principles of justice to the distribution of the bargaining range. Business Ethics: A European Review, 22(3), 277–291.

    Article  Google Scholar 

  • Hudon, M., & Sandberg, J. (2013). The ethical crisis in microfinance: Issues and findings. Business Ethics Quarterly, 23(4), 561–589.

  • Hudon, M., & Traça, D. (2011). On the efficiency effects of subsidies in microfinance: An empirical inquiry. World Development, 39(6), 966–973.

    Article  Google Scholar 

  • IFC. (2012). IFC invests $1.9 million in financiamiento progresemos to expand microlending in Mexico. Retrieved April, 11, 2013 from http://www.ifc.org/ifcext%5Cpressroom%5CIFCPressRoom.nsf%5C0%5C342A35915A84E5E485257A8A00641A3F.

  • Jamal, K., & Bowie, N. E. (1995). Theoretical considerations for a meaningful code of professional ethics. Journal of Business Ethics, 14(9), 703–714.

    Article  Google Scholar 

  • Kaptein, M. (2004). Business codes of multinational firms: What do they say? Journal of Business Ethics, 50(1), 13–31.

    Article  Google Scholar 

  • Kaptein, M. (2011). Towards effective codes: Testing the relationship with unethical behavior. Journal of Business Ethics, 99(2), 233–251.

    Article  Google Scholar 

  • Kaptein, M., & Schwartz, M. S. (2008). The effectiveness of business codes: A critical examination of existing studies and the development of an integrated research model. Journal of Business Ethics, 77(2), 111–127.

    Article  Google Scholar 

  • Kaptein, M., & Wempe, J. (2002). The balanced company: A theory of corporate integrity. New York: Oxford University Press.

    Book  Google Scholar 

  • Kolk, A., & van Tulder, R. (2002). The effectiveness of self-regulation: Corporate codes of conduct and child labour. European Management Journal, 20(3), 260–271.

    Article  Google Scholar 

  • Krell, M. (2013). MIX microfinance world: State of social performance in Mexico. Washington, DC: MIX Market.

    Google Scholar 

  • Langlois, C. C., & Schlegelmilch, B. B. (1990). Do corporate codes of ethics reflect national character? Evidence from Europe and the United States. Journal of International Business Studies, 21(4), 519–539.

    Article  Google Scholar 

  • Ledgerwood, J. (2013). The new microfinance handbook: A financial market system perspective. Washington, DC: The World Bank.

    Book  Google Scholar 

  • Lewis, J. C. (2008). Microloan sharks. Stanford Social Innovation Review, 6(3), 54–59.

    Google Scholar 

  • Lützenkirchen, C., & Weistroffer, C. (2012). Microfinance in evolution: An industry between crisis and advancement. Frankfurt am Main, Germany: DB Research.

    Google Scholar 

  • Mair, J., & Martí, I. (2006). Social entrepreneurship research: A source of explanation, prediction, and delight. Journal of World Business, 41(1), 36–44.

    Article  Google Scholar 

  • Marquis, C., & Lounsbury, M. (2007). Vive la résistance: Competing logics and the consolidation of U.S. community banking. Academy of Management Journal, 50(4), 799–820.

    Article  Google Scholar 

  • McCabe, D. L., & Trevino, I. K. (1993). Academic dishonesty: Honor codes and other contextual influences. Journal of Higher Education, 64(5), 522–538.

  • McCabe, D. L., Treviño, L. K., & Butterfield, K. D. (1996). The influence of collegiate and corporate codes of conduct on ethics-related behavior in the workplace. Business Ethics Quarterly, 6, 461–476.

    Article  Google Scholar 

  • Mersland, R., & Strøm, R. Ø. (2010). Microfinance mission drift? World Development, 38(1), 28–36.

    Article  Google Scholar 

  • MIX Market. (2012). Microfinance in Mexico: Country profile. Retrieved April 4, 2013, from http://www.mixmarket.org/mfi/country/Mexico.

  • MIX Market. (2013). MFI report Compartamos Banco. Retrieved April 1, 2013 from http://www.mixmarket.org/mfi/compartamos-banco/report.

  • Montgomery, R. (1996). Disciplining or protecting the poor? Avoiding the social costs of peer pressure in micro-credit schemes. Journal of International Development, 8(2), 289–305.

    Article  Google Scholar 

  • Morduch, J. (1999). The microfinance promise. Journal of Economic Literature, 37(4), 1569–1614.

    Article  Google Scholar 

  • Muhammad, A. (2009). Grameen and microcredit: A tale of corporate success. Economic and Political Weekly, 44(35), 35–42.

    Google Scholar 

  • Murphy, P. E. (2005). Developing, communicating and promoting corporate ethics statements: A longitudinal analysis. Journal of Business Ethics, 62(2), 183–189.

    Article  Google Scholar 

  • Nair, T. S. (2011). Microfinance: Lessons from a crisis. Economic and Political Weekly, 46(6), 23–26.

    Google Scholar 

  • Organization for Economic Co-Operation and Development (OECD). (2001). Codes of corporate conduct: Expanded review of their contents, working papers on international investment, 2001/6. Paris: Organization for Economic Co-operation and Development (OECD).

  • Peattie, K., & Morley, A. (2008). Eight paradoxes of the social enterprise research agenda. Social Enterprise Journal, 4(2), 91–107.

    Article  Google Scholar 

  • Perdomo, M. (2008). Consumer protection: A client perspective, GFEP research note, Davis, CA, USA: Freedom from Hunger.

  • Preuss, L. (2010). Codes of conduct in organizational context: From cascade to lattice-work of codes. Journal of Business Ethics, 94(4), 471–487.

    Article  Google Scholar 

  • Preuss, L. (2012). Responsibility in paradise? The adoption of CSR tools by companies domiciled in tax havens. Journal of Business Ethics, 110(1), 1–14.

    Article  Google Scholar 

  • Prior, F., & Argandoña, A. (2009). Credit accessibility and corporate social responsibility in financial institutions: the case of microfinance. Business Ethics: A European Review, 18(4), 349–363.

    Article  Google Scholar 

  • Priyadarshee, A., & Ghalib, A. K. (2012). Over-indebtedness, coercion, and default: Causes of the Andhra Pradesh microfinance crisis and regulatory implications. Enterprise Development and Microfinance, 23(3), 185–200.

    Article  Google Scholar 

  • Reed, L. R. (2013). Vulnerability: The state of the microcredit summit campaign report 2013. Washington, DC: Microcredit Summit Campaign.

    Google Scholar 

  • Reille, X. (2010). SKS IPO success and excess. Retrieved April 1, 2013, from http://www.cgap.org/blog/sks-ipo-success-and-excess.

  • Roodman, D. (2012). Due diligence: An impertinent inquiry into microfinance. Washington, DC: Center for Global Development.

    Google Scholar 

  • Rosenberg, R. (2007). CGAP reflections on compartamos initial public offering: A case study on microfinance interest rates and profits. CGAP focus note 42. Washington, DC: CGAP.

    Google Scholar 

  • Rosenberg, R., Gonzalez, A., & Narain, S. (2009). The new moneylenders: Are the poor being exploited by high microcredit interest rates? CGAP occasional paper 15. Washington, DC: CGAP.

    Google Scholar 

  • Rutherford, S. (2009). The Poor and their money. Warwickshire: Practical Action.

    Book  Google Scholar 

  • Sandberg, J. (2012). Mega-interest on microcredit: Are lenders exploiting the poor? Journal of Applied Philosophy, 29(3), 169–185.

    Article  Google Scholar 

  • Schwartz, M. S. (2002). A code of ethics for corporate code of ethics. Journal of Business Ethics, 41(1/2), 27–43.

    Article  Google Scholar 

  • Singh, J. B. (2006). A comparison of the contents of the codes of ethics of Canada’s largest corporations in 1992 and 2003. Journal of Business Ethics, 64(1), 17–29.

    Article  Google Scholar 

  • Singh, J. B. (2011). Determinants of the effectiveness of corporate codes of ethics: An empirical study. Journal of Business Ethics, 101, 385–395.

    Article  Google Scholar 

  • Singh, J., Carasco, E., Svensson, G., Wood, G., & Callaghan, M. (2005). A comparative study of the contents of corporate codes of ethics in Australia, Canada and Sweden. Journal of World Business, 40(1), 91–109.

    Article  Google Scholar 

  • Stevens, B. (1994). An analysis of corporate ethical code studies: Where do we go from here? Journal of Business Ethics, 13(1), 63–69.

    Article  Google Scholar 

  • Stevens, B. (1999). Communicating ethical values: A study of employee perceptions. Journal of Business Ethics, 20, 113–120.

    Article  Google Scholar 

  • Stevens, B. (2008). Corporate ethical codes: Effective instruments for influencing behavior. Journal of Business Ethics, 78(4), 601–609.

    Article  Google Scholar 

  • Stohl, C., Stohl, M., & Popova, L. (2009). A new generation of corporate codes of ethics. Journal of Business Ethics, 90(4), 607–622.

    Article  Google Scholar 

  • Symbiotics. (2012). Symbiotics 2012 MIV survey report: Market data and peer group analysis. Geneva: Symbiotics.

  • The Smart Campaign. (2013). About the campaign: Frequently asked questions. Retrieved April 5, 2013, from http://www.smartcampaign.org/about-the-campaign/frequently-asked-questions .

  • Waddock, S. A., Bodwell, C., & Graves, S. B. (2002). Responsibility: The new business imperative. Academy of Management Executive, 16(2), 132–148.

    Article  Google Scholar 

  • Wagner, C. (2012). From boom to bust: How different has microfinance been from traditional banking? Development Policy Review, 30(2), 187–210.

    Article  Google Scholar 

  • Weaver, G., Treviño, L. K., & Cochran, P. (1999). Corporate ethics practices in the mid-1990s: An empirical study of the Fortune 1,000. Journal of Business Ethics, 18(3), 283–294.

    Article  Google Scholar 

  • Weller, S. (1988). The effectiveness of corporate codes of ethics. Journal of Business Ethics, 7, 389–396.

    Article  Google Scholar 

  • World Bank. (2013). Mexico overview. Retrieved April 5, 2013, from http://www.worldbank.org/en/country/mexico/overview.

Download references

Acknowledgments

We thank Boudewijn de Bruin, Carine Roenen Laroche, Compartamos Banco, Elisabeth Johnson, José Roberto Flores Athie, Laura Galindo, Pilar Ramirez, and Roxane Julien for the interviews. We also thank Olga Biosca for their very useful comments on a draft version of the paper. This research has been carried out by one of the authors in the framework of an “Interuniversity Attraction Pole” on social enterprise, funded by the Belgian Science Policy (SOCENT).

Author information

Authors and Affiliations

  1. Solvay Brussels School of Economics and Management (SBS-EM), Université Libre de Bruxelles (U.L.B), Franklin Rooseveltlaan 42, 1050, Brussels, Belgium

    Lauren Kleynjans

  2. Centre Emile Bernheim (CEB), Centre for European Research in Microfinance (CERMi), Solvay Brussels School of Economics and Management (SBS-EM), Université Libre de Bruxelles (U.L.B), 42 Avenue Roosevelt, 1050, Brussels, Belgium

    Marek Hudon

Authors
  1. Lauren Kleynjans
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marek Hudon
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marek Hudon.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Kleynjans, L., Hudon, M. A Study of Codes of Ethics for Mexican Microfinance Institutions. J Bus Ethics 134, 397–412 (2016). https://doi.org/10.1007/s10551-014-2434-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-014-2434-y

Keywords

Search

Navigation