The Compartamos microfinance IPO: Mission conflicts in hybrid institutions with diverse shareholding

Abstract

Compartamos is an exemplary case of private equity‐backed governance in microfinance.

To profit or not to profit? Assessing financial sustainability outcomes of microfinance institutions

“…However, they did not create new shares in the IPO process; therefore, they did not receive new funds. Several authors (Ashta & Hudon, ; Rosenberg, Gonzalez, & Narain, ; Schmidt, ) have criticized the IPO and the interest rates charged by Compartamos. The incentives alignment is controversial because the goal of publicly listed companies is to maximize the shareholders' return, but this can cause an ethical conflict because their clients are mostly poor people from developing countries.…”

Governance of microfinance institutions (MFIs) in Cameroon: what lessons can we learn?

“…As a result, these large boards pose difficulties for managers thus resulting in a conflict of interest (Bassem, 2009 (Ashta and Hudon, 2012). As this consultant argues, "Most of the MFIs already pay huge fees to their umbrella organisations as patent rights.…”

An Overview of Microfinance

“…Finally, some critics also point out that a number of MFIs are so focused on profit motivation leading them to charge high interest rates which in turn leads the poor borrowers feeling deceived (Eversole, 2003). Examples include the case of MFI Compartamos which reportedly was charging interest rates as high as 99% per year (Ashta & Bush, 2009;Ashta & Hudon, 2012;Lewis, 2008;Smith & Epstein, 2007), and the case of SKS in India with allegations that its microcredit programmes led to too much borrower stress and even suicides (Ashta, Khan & Otto, 2011). Cheston & Kuhn (2002) also argue that women who borrow from MFIs suffer ill health and exhaustion because of overwork, caused by compulsory participation in the timeconsuming meetings, engaging in income-generating activities to pay off the loans, and simultaneously, taking traditional responsibilities of the family, such as looking after children.…”