Economic and Social Roles for Microfinance Institutions: Exposition, Approaches, and Suggestions

Abstract

This paper is focused on the unique question of the nature, design, evaluation, and dynamics of the social role of a microfinance institution (MFI), as opposed to its economic role. The economic role is taken as the normal or traditional role for an MFI to generate profit or a surplus as a result of its operations, whereas the social role refers to the voluntary role of entertaining philanthropic objectives as a complement to the MFI’s economic role. These roles will be defined in more details and contrasted later in the paper. It is hoped that the logic and analyses in the paper apply to all MFIs, including the savings and credit co-operative societies (SACCOs) in Uganda. To the best of the author’s knowledge, no theory appears to exist on this subject of the social versus the economic roles of an MFI.