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Putting Responsible Finance to Work for Citi Microfinance

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Abstract

This paper develops an ethical framework for responsible finance and then applies it to Citigroup (Citi), a major financial actor in the microfinance sector, to see whether it meets with such obligations. The framework consists of two categories of responsibility. The first category is the special social responsibility of financial institutions; and the second is the fundamental principles of ethical behavior in financial services. From Citigroup’s microfinance model, scope of business, and multiple roles in the market, the company seems to be fulfilling its responsibility in inclusive finance. However, judged in term of the principles of integrity, objectivity, fairness, professionalism, and diligence, it falls short of its ethical responsibility. In view of this shortcoming, Citigroup should recall its obligation to avoid conflicts of interest, to provide responsible advice, to protect clients from over-indebtedness, and most importantly, to act with integrity.

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Notes

  1. The author does not attempt to provide an exhaustive classification of or a comprehensive discussion on corporate responsibility. Focusing on these two categories of responsibility is sufficient for the purpose of this paper.

  2. Three features of a profession are commonly cited: (1) a specialized body of knowledge; (2) a high degree of organization and self-regulation, and (3) a commitment to public service. See Boatright (2008, chap 2).

  3. The company has to be accountable for its announced information (e.g., CSR reports, annual reports, website announcements, etc.), thus they are used as basic materials for this study.

  4. Responsibility of product-providers has been emphasized by regulators. For instance, in the UK, the Financial Services Authority identifies key responsibility areas for manufacturers of structured financial products to fulfill in product development and governance, including product approval procedures, identification of target markets, product design and development, stress- testing and modeling, distribution and communications, and post-sale responsibility (FSA 2011).

  5. Credit Suisse was the lead underwriter in the international market, but Banamex, a subsidiary of Citigroup, and Banorte co-arranged domestic underwriting in Mexico.

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  1. Department of Finance, National Central University, Chungli, Taiwan

    Tzu-Kuan Chiu

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Chiu, TK. Putting Responsible Finance to Work for Citi Microfinance. J Bus Ethics 119, 219–234 (2014). https://doi.org/10.1007/s10551-013-1626-1

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