Date of Award

5-2017

Degree Type

Thesis

Degree Name

Departmental Honors

Department

Economics and Finance

First Advisor

Ben Blau

Second Advisor

Shannon Peterson

Third Advisor

Kristine Miller

Abstract

Microfinance for-profit organizations flooded the market in the early 2000's when microcredit demonstrated profitability. Ever since, an intense debate arose contesting the morality of profiting from the poor. Many for-profit microfinance institutions were accused of predatory lending through high interest rates and aggressive marketing and payment collection. In this paper, I examine the validity of the arguments for and against for-profits by extensively comparing the different target audiences of the charity sector and the private sector and the main arguments of each side. I conclude that, although the ability to serve the poor is compromised by profit motives, for-profit microfinance organizations are serving a different market—and a much needed one—than nonprofits. Therefore, for-profits serve a function that, as of right now, nonprofits are not able to.

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