Microfinance has been recognized as one of the most potent poverty alleviation tools of contemporary times. However, behind this facade of seemingly universal acclaim is a continual and increasingly visible clash between those who consider microfinance to be a commercial activity, and the opposing camp that insists that the original developmental spirit of microfinance be privileged. This thesis studies the interplay between the commercialization camp and its opponents. It seeks to find out how and why two opposing worldviews on microfinance persisted over a period of time. How are key players in microfinance promoting those worldviews? And how are those opposing worldviews played out within organizations?
The thesis uses the theoretical lens of institutional logics and institutional entrepreneurship. The thesis highlights structural constraints to the reconciliation of logics of commercialization and poverty alleviation, and the emergence of a single dominant logic. First, the thesis shows that microfinance is embedded in a broader development field because of the former’s original intent as a poverty alleviation tool. This historically determined developmental identity of microfinance reacts negatively to any attempts to make commercialization the dominant imperative. Second, microfinance has to adopt multiple developmental goals due to its identity as a development tool. But the achievement of development goals is difficult to track due to missing universally recognized performance indicators. Both camps cannot prove the developmental efficacy of their organizing models.
The second part of the thesis looks at the behaviour of two key players, Muhammad Yunus of Grameen Bank, Bangladesh, and the Consultative Group for Assisting the Poor (CGAP), aligned with the poverty alleviation and commercialization stances, respectively. The thesis identifies unique features of institutional change strategies of an individual pioneer (Muhammad Yunus) who introduces a novel organizational form (Grameen Bank). The thesis expands the scope of the notion of ‘social position’ of institutional entrepreneurs by highlighting the unique legitimating agency of Yunus as an entrepreneurial pioneer. Hence the thesis shows that Yunus was radical in his ideas, vocal in promoting his prescriptions and broader in the scope of his convening activities. CGAP, as an organization representing the interests of the powerful resource providers in microfinance, was measured in terms of its ‘technical’ conceptualization, focussed on convening a small set of powerful actors to achieve its objectives.
The third element of this thesis is the interplay between the poverty alleviation and commercialization imperatives within the microfinance programme of a commercial bank. Through analysis of both publicly available and confidential archival material, the thesis looks at how the microfinance programme went through a cycle of emergence, growth and then ultimate decline. The official reasons for the decline echo the reasons identified in both the academic and the practitioner literature. However, analysis of interviews of key bank personnel in microfinance shows that altruistic and commercial imperatives were reconciled or contested for reasons beyond the ‘technical’ aspects of microfinance. Personal relations were governed on the basis of the culture of the region which favours personal relationships based on caste and ethnicity (as well as religion) over official relationships, and the culture of exchanging personal favours as part of business/official dealings. Hence, this case study showed that logics or worldviews may be opposed or reconciled within organizations for structural reasons. But the structures which could possibly come into play would predominantly be the broader cultures in which individuals engaged in microfinance are embedded.