Abstract
This study examines whether microfinance institutions (MFIs) that serve women borrowers at the base of the economic pyramid are likely to adopt a written code of positive organizational ethics (POE). Using econometric analysis of operational and economic data of a sample of MFIs from across the world, we find that two contextual factors—poverty level and lack of women’s empowerment—moderate the influence of an MFI’s percentage of women borrowers on the probability of the MFI having a POE code. MFIs that serve more women borrowers are more likely to adopt a POE code, especially in negative contexts (where women borrowers face poverty and disempowerment and are therefore susceptible to abuse). This study provides evidence that MFIs can build positive ethical strength in negative contexts.
Similar content being viewed by others
References
Adams, J. S., Tashchian, A., & Shore, T. H. (2001). Codes of ethics as signals for ethical behavior. Journal of Business Ethics, 29(3), 199–211.
American Psychological Association. (2003). Resolution on poverty and socioeconomic status. Roeper Review, 25(3), 103.
Bansal, P., & Hunter, T. (2003). Strategic explanations for the early adoption of ISO 14001. Journal of Business Ethics, 46(3), 289–299.
Brau, J. C., & Woller, G. M. (2004). Microfinance: A comprehensive review of the existing literature. Journal of Entrepreneurial Finance and Business Ventures, 9(1), 1–26.
Cabigon, J. V. (2005). Poverty: The cause and consequence of Philippine mortality. Paper presented at the CICRED Seminar on Mortality as Both a Determinant and a Consequence of Poverty and Hunger.
Caza, A., Barker, B. A., & Cameron, K. S. (2004). Ethics and ethos: The buffering and amplifying effects of ethical behavior and virtuousness. Journal of Business Ethics, 52(2), 169–178.
CGAP. (2011). Microfinance gateway. CGAP (Consultative Group to Assist the Poor). Retrieved from http://www.microfinancegateway.org.
Chakrabarty, S. (2009). The influence of national culture and institutional voids on family ownership of large firms: A country level empirical study. Journal of International Management, 15(1), 32–45.
Chakrabarty, S. (2013). The influence of unrelated and related diversification on fraudulent reporting. Journal of Business Ethics (in press).
Chakrabarty, S., & Bass, A. E. (2013). Encouraging entrepreneurship: Microfinance, knowledge support, and the costs of operating in institutional voids. Thunderbird International Business Review, 55(5).
Chakrabarty, S., & Wang, L. (2012). The long-term sustenance of sustainability practices in MNCs: A dynamic capabilities perspective of the role of R&D and internationalization. Journal of Business Ethics, 110(2), 205–217.
Chakrabarty, S., & Wang, L. (2013). Climate change mitigation and internationalization: The competitiveness of multinational corporations. Thunderbird International Business Review, 55(6).
Chakrabarty, S., & Whitten, D. (2011). The sidelining of top IT executives in the governance of outsourcing: Antecedents, power struggles, and consequences. IEEE Transactions on Engineering Management, 58(4), 799–814.
Cheston, S., & Kuhn, L. (2002). Empowering women through microfinance. In S. Daley-Harris (Ed.), Pathways out of poverty: Innovations in microfinance for the poorest families (pp. 167–228). Bloomfield, CT: Kumarian Press.
Comer, D. R., & Vega, G. (2011). Introduction: Why moral courage matters in organizations. In D. R. Comer & G. Vega (Eds.), Moral courage in organizations: Doing the right thing at work. New York: M.E. Sharpe, Inc.
Cons, J. K. (2010). Contested credit landscapes: Microcredit, self-help and self-determination in rural Bangladesh. Third World Quarterly, 31(4), 637–654.
D Espallier, B., Guérin, I., & Mersland, R. (2011). Women and repayment in microfinance. World Development, 39(5), 758–772.
Duggan, C. (2009). Doing bad by doing good? Theft and abuse by lenders in inadequately regulated microfinance markets. Harvard Business School Working Paper Series, 10-014.
Economist. (2010). Banyan: Under water. The Economist, 950(11 Dec 2010), Retrieved from: economist.com/node/17675848.
Fafchamps, M., & Minten, B. (2006). Crime, transitory poverty, and isolation: Evidence from Madagascar. Economic Development and Cultural Change, 54(3), 579–603.
Feigenberg, B., Field, E., & Pande, R. (2011). The economic returns to social interaction: Experimental evidence from microfinance. Mimeo: Harvard Department of Economics.
García-Moreno, C., Jansen, H. A. F. M., Ellsberg, M., Heise, L., & Watts, C. (2005). WHO multi-country study on women’s health and domestic violence against women: Initial results on prevalence, health outcomes and women’s responses. Geneva: WHO Press, World Health Organization.
Godquin, M. (2004). Microfinance repayment performance in Bangladesh: How to improve the allocation of loans by MFIs. World Development, 32(11), 1909–1926.
Goldberg, N. (2005). Measuring the impact of microfinance: Taking stock of what we know. Washington DC: Grameen Foundation.
Green, K. W., Chakrabarty, S., & Whitten, D. (2007). Organisational culture of customer care: Market orientation and service quality. International Journal of Services and Standards, 3(2), 137–153.
Gudz, S. F. (1999). The potential role of microfinance institutions in mobilizing savings: Lessons from Kenya and Uganda/Stephen F. Gudz Working paper; WP 99-16: Ithaca, NY: Dept. of Agricultural, Resource, and Managerial Economics, Cornell University.
Handelsman, M. M., Knapp, S. J., & Gottlieb, M. C. (2002). Positive ethics. In C. R. Snyder & S. J. Lopez (Eds.), Handbook of positive psychology (pp. 731–744). New York: Oxford University Press.
Handelsman, M. M., Knapp, S. J., & Gottlieb, M. C. (2009). Positive ethics: Themes and variations. In S. J. Lopez & C. R. Snyder (Eds.), Oxford handbook of positive psychology (pp. 105–113). New York: Oxford University Press.
Inter-American Development Bank. (2005). Gender equality and women’s empowerment. The millennium development goals: A Latin American and Carribbean perspective. Washington, DC.
Iyer, L., Mani, A., & Mishra, P., & Topalova, P. (2011). The power of political voice: Women’s political representation and crime in India. Harvard Business School.
Jose, A., & Thibodeaux, M. S. (1999). Institutionalization of ethics: The perspective of managers. Journal of Business Ethics, 22(2), 133–143.
Karim, L. (2011). Microfinance and its discontents: Women in debt in Bangladesh. Minneapolis: University of Minnesota Press.
Karnani, A. (2008). Help, don’t romanticize, the poor. Business Strategy Review, 19(2), 48–53.
Kenworthy, L., & Malami, M. (1999). Gender inequality in political representation: A worldwide comparative analysis. Social Forces, 78(1), 235–269.
Khanna, T., Palepu, K. G., & Sinha, J. (2005). Strategies that fit emerging markets. Harvard Business Review, 83(6), 63–74.
Linley, P. A., Joseph, S., Harrington, S., & Wood, A. M. (2006). Positive psychology: Past, present, and (possible) future. Journal of Positive Psychology, 1, 3–16.
Mair, J., & Marti, I. (2009). Entrepreneurship in and around institutional voids: A case study from Bangladesh. Journal of Business Venturing, 24(5), 419–435.
Mair, J., Martí, I., & Ventresca, M. J. (2012). Building inclusive markets in rural Bangladesh: How intermediaries work institutional voids. Academy of Management Journal, 55(4), 819–850.
MIX Market. (2010). Financial data and social performance measures for microfinance. Microfinance Information Exchange.
Mayoux, L. (2007). Not only reaching, but also empowering women: Ways forward for the next microfinance decade. Microfinance and Gender: New Contributions to an Old Issue (Vol. 37, pp. 35–60). ADA Dialogue.
Milgram, B. L. (2001). Operationalizing microfinance: Women and craftwork in Ifugao, Upland Philippines. Human Organization, 60(3), 212–224.
Molyneux, M., & Razavi, S. (2002). Gender justice, development and rights. Oxford: Oxford University Press.
Morduch, J. (1999). The microfinance promise. Journal of Economic Literature, 37(4), 1569–1614.
Murphy, P. E. (1995). Corporate ethics statements: Current status and future prospects. Journal of Business Ethics, 14(9), 727–740.
North, D. (1990). Institutions, institutional change and economic performance (Political Economy of Institutions and Decisions). Cambridge: Cambridge University Press.
Odell, K. (2010). Measuring the impact of microfinance: Taking another look. Washington, DC: Grameen Foundation Publication Series.
Pickup, F., Williams, S., & Sweetman, C. (2001). Ending violence against women: A challenge for development and humanitarian work. Oxford: Oxfam.
Pitt, M. M., & Khandker, S. R. (1998). The impact of group-based credit programs on poor households in Bangladesh: Does the gender of participants matter? The Journal of Political Economy, 106, 958–996.
Prahalad, C. K., & Hammond, A. (2002). Serving the world’s poor, profitably. Harvard Business Review, 80(9), 48–57.
Rahman, A. (1999). Micro-credit initiatives for equitable and sustainable development: Who pays? World Development, 27(1), 67–82.
Raphael, J., & Tolman, R. (1997). Trapped by poverty, trapped by abuse: new evidence documenting the relationship between domestic violence and welfare. Chicago: Taylor Institute and University of Michigan, Ann Arbor.
Rasche, A., Baur, D., van Huijstee, M., Ladek, S., Naidu, J., Perla, C., et al. (2008). Corporations as political actors—A report on the first Swiss master class in corporate social responsibility. Journal of Business Ethics, 80(2), 151–173.
Rice, J. S. (2010). Free trade, fair trade and gender inequality in less developed countries. Sustainable Development, 18(1), 42–50.
Rosenberg, R. (2009). Measuring results of microfinance institutions: Minimum indicators that donors and investors should track. Consultative Group to Assist the Poor/The World Bank.
Schreiner, M. (2002). Aspects of outreach: A framework for discussion of the social benefits of microfinance. Journal of International Development, 14(5), 591–603.
Sekerka, L. E., & Godwin, L. N. (2010). Strengthening professional moral courage: A balanced approach to ethics training. Training & Management Development Methods, 24, 63–74.
Sekerka, L. E., Vacharkulksemsuk, T., & Fredrickson, B. L. (2011). Positive emotions: Broadening and building upward spirals of sustainable enterprise. In K. S. Cameron & G. M. Spreitzer (Eds.), The Oxford handbook of positive organizational scholarship (pp. 168–177). New York: Oxford University Press.
Sims, R. R. (1991). The institutionalization of organizational ethics. Journal of Business Ethics, 10(7), 493–506.
Swain, R. B. (2007). Can microfinance empower women? Self-help groups in India. Microfinance and Gender: New Contributions to an Old Issue (ADA Dialogue), 37, 61–82.
Swain, R. B., & Wallentin, F. Y. (2009). Does microfinance empower women? Evidence from self-help groups in India. International Review of Applied Economics, 23(5), 541–556.
UNDP. (2007). Human Development Report 2007/2008.
Verbos, A. K., Gerard, J. A., Forshey, P. R., Harding, C. S., & Miller, J. S. (2007). The positive ethical organization: Enacting a living code of ethics and ethical organizational identity. Journal of Business Ethics, 76(1), 17–33.
Weber, J. (1993). Institutionalizing ethics into business organizations: A model and research agenda. Business Ethics Quarterly, 3(4), 419–436.
Whitten, D., Chakrabarty, S., & Wakefield, R. (2010). The strategic choice to continue outsourcing, switch vendors, or backsource: Do switching costs matter? Information & Management, 47(3), 167–175.
World Bank. (2011). World Development Indicators (WDI). Retrieved from http://data.worldbank.org/indicator/all.
Zardkoohi, A., Bierman, L., Panina, D., & Chakrabarty, S. (2011). Revisiting a proposed definition of professional service firms. Academy of Management Review, 36(1, dialogue), 180–184.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Chakrabarty, S., Bass, A.E. Institutionalizing Ethics in Institutional Voids: Building Positive Ethical Strength to Serve Women Microfinance Borrowers in Negative Contexts. J Bus Ethics 119, 529–542 (2014). https://doi.org/10.1007/s10551-013-1833-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-013-1833-9