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Abstract |
Microfinance is a mechanism of providing financial assistance to those who
cannot access traditional banking because they are too poor. The assistance is in the
form of small loans of an average size around $200. Available data indicates that there
are close to 3,500 microfinance institutions (MFIs) reaching out to 130 million clients.
The worldwide majority of MFIs target women as their main clients. Most of them are
able to maintain a high loan repayment rate of 95-100 per cent, creating a buzz in
popular media like the Wall Street Journal with companies like Kiva Loans. This paper
explores the extent to which favorable media coverage of microfinance affects the
profits of MFIs in the context of India, one of the largest microfinance markets globally.
With any sudden turn of events – any untoward incident - that makes media coverage
of microfinance unfavorable, the flow of international investments to MFIs would
decline consequently reducing their financial profitability. We examined the effect of
one such “untoward incident,” the Andhra Pradesh (AP) microfinance crisis of 2010,
which turned some coverage for microfinance hostile. We chose this crisis because it
occurred after the honeymoon period when the Grameen Bank and Muhammad Yunus
won the 2006 Nobel Peace Prize, when a flurry of bad press about microfinance started
appearing in international media. Thus, this crisis marks a natural break in favorability
of media coverage. Feminist policies encouraged by development economists
throughout academic institutions and universities recommend making loans to women
because women are likely to use their money responsibly by investing in their
businesses and feeding their families rather than wasting their money on alcohol and
tobacco. This unwavering faith in women is essentially feminism. We can define
feminist policies as those rules, incentives, and regulations that encourage women to be
financially literate and financially independent of their families and spouses, which can
often lead to a better economy. These feminist policies represent a change for Indian
society, which is composed generally of patriarchal economic systems where men are
heads of their households and breadwinners. In this paper, we employ a natural
experiment design based on a first difference analysis to analyze change in profitability
of microfinance institutions in India due to the crisis in AP that resulted in media
coverage of microfinance turning unfavorable. Since these effects could vary
depending on the ideology of the media outlets, we chose to include multiple
newspapers of different political ideologies published from within India and outside in
order to examine the relationship between media coverage of microfinance and
profitability of the institution. Ultimately, we found that media coverage of
microfinance did not impact profitability of microfinance institutions, which surprised
us because we thought that feminist policies would drive global recognition and
investment. This surprise stems from the fact that microfinance investors are generally
banks, not the global public. |
International Journal of Law, Ethics, and TechnologyAd Frontieras Iuris et Scientiarum: Inclusio, Innovatio, Progressio