This paper develops an ethical framework for responsible finance and then applies it to Citigroup (Citi), a major financial actor in the microfinance sector, to see whether it meets with such obligations. The framework consists of two categories of responsibility. The first category is the special social responsibility of financial institutions; and the second is the fundamental principles of ethical behavior in financial services. From Citigroup’s microfinance model, scope of business, and multiple roles in the market, the company seems to (...) be fulfilling its responsibility in inclusive finance. However, judged in term of the principles of integrity, objectivity, fairness, professionalism, and diligence, it falls short of its ethical responsibility. In view of this shortcoming, Citigroup should recall its obligation to avoid conflicts of interest, to provide responsible advice, to protect clients from over-indebtedness, and most importantly, to act with integrity. (shrink)

What are financial institutions' social responsibilities in developing countries? On the one hand, these institutions share the generic responsibilities of all human organizations and business enterprises. However, their specific social responsibility is the performance of the social function of financial intermediaries, which, in the case of emerging countries, consists mainly of contributing to economic growth and solving the problem of poverty. This paper describes a number of technical-economic and moral problems that take us to a consideration of the performance of (...) banking operations in microfinancing, with special reference to Latin America. The paper also provides a series of recommendations that, in addition to contributing to solving the development and poverty problems in emerging countries, help define financial institutions' social responsibility in such countries. (shrink)

Microfinance aims to better the livelihoods of the bottom of the pyramid by providing them with financial services. However, recent studies show that microfinance can have adverse effects, leading clients into over-indebtedness. This dissertation argues that microfinance clients are by default vulnerable and offers ways to rethink microfinance as client-centered, presuming a responsibility for client protection. Part I discusses the vulnerability of clients and the centrality of their protection. Part II analyzes the causes and consequences of overindebtedness and suggests state (...) regulations, financial literacy programs, and soft law standards for its mitigation. Part III introduces the concept of responsible microfinance, which claims that not only microfinance institutions but also other stakeholders, such as states and transnational and international organizations, have a responsibility to protect microfinance clients. Part IV accepts that over-indebtedness has to be addressed from several angles and considers how public and private actors may enhance its alleviation and develops an encompassing multi-stakeholder framework of responsible microfinance. Developing this framework includes a thorough evaluation of the suitability of ten novel strategies, such as behaviorally informed consumer protection regulations, educational soap operas, and Smart Campaign’s Client Protection Principles, to further the mitigation of overindebtedness. (shrink)

What are financial institutions' social responsibilities in developing countries? On the one hand, these institutions share the generic responsibilities of all human organizations and business enterprises. However, their specific social responsibility is the performance of the social function of financial intermediaries, which, in the case of emerging countries, consists mainly of contributing to economic growth and solving the problem of poverty. This paper describes a number of technical‐economic and moral problems that take us to a consideration of the performance of (...) banking operations in microfinancing, with special reference to Latin America. The paper also provides a series of recommendations that, in addition to contributing to solving the development and poverty problems in emerging countries, help define financial institutions' social responsibility in such countries. (shrink)