Recent events at SKS Microfinance have re-triggered the debate about microfinance and “doing good”. (Read India Knowledge@Wharton article “Capitalism vs. Altruism” here)
Why is it that we get upset when an SKS makes oodles of money but don’t bat an eyelid when Microsoft does? Or closer to home, when HLL makes money by selling shampoo sachets to the same poor households?
We can argue that business is business so we should hold SKS to the same standard as any other business. But some people argue that any microfinance business is not “any other business”, but isn’t it? What makes is special?
Let me play the devil’s advocate:
As long as it is a business funded by private investors, it should go by whatever objectives the investors want to achieve. Even if it is funded by grants, presumably the grant-giving agency should decide what it wants to achieve. Only if we are putting in public funds (as in tax-payer funds), can we hold the business to the higher standard of providing “public goods” at the cost of lower profits. We don’t demand or require that P&G and HLL provide low-cost products for the poor — if the market is big enough and attractive enough, they will; if not, then not.
The primary objective of all businesses is to make money off of their customers whether rich or poor (though they would never put it so starkly). So, why should we hold privately-funded microfinance institutions to a different standard?