The microfinance paradox: The questions that social entrepreneurship theory

Transcription

1 Tapiwa Winston SEREMANI EM LYON Business School 23 avenue Guy de Collongue Ecully France Book Chapter: The microfinance paradox: The questions that social entrepreneurship theory needs to answer Introduction Zizi harina nyanga (Shona Language): The owl does not have horns (despite the hornlike appearance of its ears) Not everything is as it appears on the surface (African proverb). No contemporary discussion on social entrepreneurship would be complete without mention of the pioneering work by Professor Muhammad Yunnus in the development of the microcredit concept that has since evolved to become the broader microfinance concept. A distinction between microcredit and microfinance is necessary at this early stage. Whilst microcredit involves providing the poor with access to credit facilities that they are traditionally sidelined from, microfinance includes the broader financial services, microcredit included, that are targeted towards the poor. The two terms are however often synonymous with each other and often interchanged. For this chapter I am interested in not only the provision of credit to the poor, but the broader approach and hence I address the matter of microfinance of which microcredit is part. Microfinance is often classified under the social entrepreneurship banner and despite the fact that there may be contention pertaining to this

2 classification, I adopt this classification as microfinance is compatible with most definitions of social entrepreneurship. The United Nations declared 2005 the international year of microcredit in recognition of the revolution in terms of approaches towards fighting poverty that microcredit ushered in (United Nations International Year of Microcredit 2005). Microcredit highlighted the unlikely marriage between business and poverty alleviation efforts. The spotlight had finally fallen on the union between entrepreneurial endeavor and addressing societal problems. Microcredit was billed as the vehicle that would deliver the United Nations Millennium Development Goals in developing countries. Microfinance spread like wild fire and became a prominent feature of discussions on development as it elevated masses of poor people from the jaws of poverty. The crowning moment came in 2006 when Prof. Yunnus was awarded the Nobel Peace Prize for his efforts and the apparent success of microfinance. This recognition was also a major victory for social entrepreneurship as business solutions to societal problems had finally been given the attention they had missed previously. Whilst the developed and developing worlds were both celebrating the new found hero, microfinance, cracks were beginning to appear in the microfinance fortress. The microfinance related suicides in the South- East Indian State of Andhra Pradesh grabbed the attention of the media and received considerable coverage. Official data and statistics are hard to come by but the press coverage pointed in the direction of a serious crisis. The report by the British Broadcasting Corporation (BBC) aptly entitled India s microfinance suicide epidemic captured the scale and nature of the crisis (Biswas 2010). Whilst the numbers are difficult to confirm, but there is general consensus in media reports that as many 200 people committed suicide in microfinance related incidents in the year 2010 alone (Polgreen & Bajaj 2010; Biswas 2010). Questions began to be asked about microfinance and its link to the suicides. Were the suicides context specific or did they point to a greater problem at the root of

3 microfinance? Were these suicides pointing to a more fundamental flaw in microfinance thinking, or worse still, to approaches that attempt to integrate business and solutions to societal problems that are now put under the banner of social entrepreneurship? This chapter explores these questions further. By focusing on the negative side of microfinance and social entrepreneurship in general, important questions related to social entrepreneurship theory arise. No central theory currently exists for entrepreneurship let alone for social entrepreneurship. Schumpeter s theory of the entrepreneur who brings about creative destruction is probably the most referred to in the field and in some senses the attempt to build a theory of social entrepreneurship is akin to attempting to run before one can walk or building a house without a foundation because of the absence of a theory of entrepreneurship. Having said that, it is however interesting, if not necessary to attempt to identify and define the building blocks that would be required for a theory of social entrepreneurship. The chapter begins with an overview of microfinance and its origins. I discuss the underlying logic and mechanism of action of microfinance and highlight the successes that microfinance has enjoyed. I do not conduct an exhaustive literature review of microfinance or social entrepreneurship as these are themes that I believe have received a great deal of attention from a number of scholars (see: Armendáriz & Morduch 2007; Zahra et al. 2009; Mair & Marti 2004). I am concerned with the underlying theoretical constructs. In the second half of the chapter I address the more thorny issues related to the often unmentioned potentially dark side of microfinance and social entrepreneurship as evidenced by the suicide epidemic in Andhra Pradesh and the numerous other problems that have dogged microfinance. I do not conduct a case study of microfinance in India or microfinance in general as I believe this has also been covered extensively ( see: Ghate 2008; Karmakar 2008; O Gorman 2010). I make reference to this incident as it is perhaps one of the better known cases of social

4 entrepreneurship gone bad. I address the theoretical aspects related to the development of a central theory of social entrepreneurship by discussing the theoretical implications of some of questions that have arisen from microfinance and its outcomes. The purpose of this chapter is to highlight questions rather than provide answers or solutions. The questions are questions that need to be addressed by social entrepreneurship practitioners, scholars and theorists in the process of developing a theory of social entrepreneurship. Microfinance The story of microfinance begins with the return of Prof. Yunnus from the United States of America where he was an economics professor to his home country, Bangladesh. Prof. Yunnus took up a teaching post at Chittagong University but whilst attempting to teach economics to students he was disturbed by the harsh reality of the poverty that surrounded him. Whilst he was already involved with several initiatives to address the poverty challenge, the major turning point came with the famine of Prof. Yunnus realized that the bigger problem was the exclusion of the poor from the formal financial system. This put them in poverty traps and it was on this premise that Prof. Yunnus began to provide small loans to the poor initially from his own pocket (Yunus & Weber 2007). The Grameen Bank founded by Prof. Yunus is considered to be the benchmark for microfinance and a vast number of microfinance institutions across the world model themselves based on the Grameen model of operation. From its inception, the Grameen Bank grew rapidly and the services were diversified to include a broader range of complementary financial products such as insurance that the poor are traditionally sidelined from. There is little doubt that microfinance was and continues to be an innovative approach towards poverty alleviation. Whilst Bangladesh is the home of microfinance and consequently the concept was more quickly taken up in Asia, microfinance is no longer only an Asian concept and has found its way across the globe.

5 Microfinance aims to fight poverty via providing the poor with access to formal financial markets from which they are traditionally sidelined. By facilitating the participation of the poor in the financial markets, microfinance provided the poor with an escape route from loan sharks that they had depended on previously (Ledgerwood 1999; Rugimbana & Spring 2009). Microfinance is grounded on the belief that providing the poor with access to finance will enable them to engage in income generating activities (entrepreneurship) which will allow them to meet their immediate needs as well as invest in long term poverty alleviation tools such as education and health care (Yunus & Weber 2007). These loans are typically small, ranging from a few dollars to a few hundred (Ledgerwood 1999; Rugimbana & Spring 2009). The figure below provides a summary of the microfinance mode of action. Fig:1 Microfinance mode of action Investment in poverty alleviation tools Increased access to finance Increased entrepreneurial activity Increased income Long term: education, health care Poverty reduction Short term: Food, temporary shocks (Source: Author) The implicit assumption underlying the microfinance model is that all poor people are able to successfully engage in entrepreneurship once they have increased access to finance.

6 Microfinance thinking assumes that by providing the poor with access to financial resources, the poor can successfully engage in entrepreneurship, raise their income and in turn invest in short term and long term poverty alleviating tools. Microfinance assumes that entrepreneurial ability is evenly distributed across any given population and that by providing the poor with access to finance they will all automatically engage in successful entrepreneurship (Yunus & Weber 2007). Traditional finance institutions require collateral when individuals borrow money but microfinance removes this requirement and hence creates inclusive financial markets in which the poor can actively participate. Microfinance uses alternative approaches to try and ensure loan repayment. An example of these approaches is group lending in which loans are given to closely knit groups and the microfiance lenders rely on the group effect and peer pressure to encourage loan repayment (Yunus & Weber 2007). To cater for the high risk factor involved with lending to the poor, the interest rates of microfinance loans are typically higher than those on traditional formal financial markets (Morduch 2000). Microfinance institutions often provide additional related services to their clients that they may need such as general advice and insurance. The specific goals of microfinance institutions vary greatly based on contexts a wide range of contingency factors. In her Microfinance Handbook Lederwood (1999) states the goals of microfinance institutions as being: To reduce poverty To empower women or disadvantaged population groups To create employment To help existing businesses to grow or diversify their activities To encourage the development of new businesses It is important to note that the approaches towards fighting poverty via increasing access to finance are not uniform and as a result there are a plethora of approaches towards poverty

7 alleviation via the route of microfinance. An example is illustrated by the fact that whilst Lederwood (1999) states the growth of existing businesses and employment creation as some of the goals of microfinance, Yunnus and Weber (2007) and Banerjee and Duflo (2011) directly challenge this notion and state encouraging the creation of microenterprises as the primary goal of microfinance and not the growth of existing enterprises. The success story Microfinance has had a huge impact in alleviating the suffering of poverty stricken communities across the globe and managed to revolutionize the manner in which loans are administered by financial institutions and in the process managed to provide much needed access to financial resources to individuals that would otherwise not have access to such resources. Microfinance has been able to encourage entrepreneurship among the poor and provide them with alternative means of survival (Lederwood 1999; Yunus & Weber 2007). Microfinance initiatives have been found to continue to function well even in times of crisis. All over the world microfinance institutions have been able to continue supporting the poor despite the existence of financial challenges as was the case in the banking crisis that occurred in Bolivia in 2003 in which the banking industry went deep into crisis but microfinance institutions continued with their work unabated (Rugimbana & Spring 2009). Microfinance has also played a pivotal role in the empowerment of women in developing countries. Microfinance generally has a gender focus and this has allowed it to improve the livelihoods of millions of women across the globe. Typically women are the preferred target of microfinance interventions and this has allowed women to break out of poverty traps and has given them the opportunity to become self sustaining and independent. There have been many success stories with some of the most celebrated of these success stories coming out of Bangladesh and India (Leach & Sitaram 2002; Mair & Marti 2009; McDade & Spring 2005;Rugimbana & Spring 2009).

8 Cracks in the fortress There is general lack of consensus on the full impact of microfinance (Graeme 1997; Stewart et al. 2010). Whilst it cannot be doubted that microfinance has been a revolution in the approach to fighting poverty and has had many success stories, there is a need scrutinize it more closely and pick out reality from fairy tale and to have more discussions of the often untold stories of the failures of microfinance, and by extension failures of social entrepreneurship. The already mentioned suicides in Andhra Pradesh paved the way for more critical analyses of microfinance. As has already been stated, more than 200 suicides were recorded in the year 2010 alone (Polgreen & Bajaj 2010; Biswas 2010). It appears the media took the lead in taking more critical stances on microfinance. As early as 2001, articles were published in the Wall Street Journal suggesting that microfinance and the Grameen project had not lived up to the bank's own hype (Pearl & Phillips 2001). People began to also question the interest rates of the microfinance loans that go as high as one hundred percent. The collection methods employed by the debt collectors also became infamous. Reliance on social networks to coerce debtors to pay back loans also fell under more critical lenses. Banerjee and Duflo (2011) asked the question, Why didn t microfinance deliver more than it did? This is an important question that needs to be addressed if microfinance is to have greater relevance in the fight against poverty in developing countries and if we are to better understand social entrepreneurship. Research increasingly shows that some of the claimed victories of microfinance were not all victories. In a survey of studies on the impact of microfinance initiatives in Sub Saharan Africa, Stewart et al. (2010) found that there were cases in which individuals ended up worse off after joining microfinance programs. In a review of studies on microfinance in Sub Saharan Africa by Stewart et al (2010), several studies found that microfinance had a negative

9 impact on the education of the children of clients. Families involved in microfinance schemes were found to be less likely to send their children to school. Stewart et al (2010) highlight a study by Barnes (2001) that found that this was particularly true for the girl child which is paradoxical when considering the gender orientation that microfinance has. In Ghana, Kenya and Malawi, Graeme (1997) found that despite the claimed success of microfinance programs in bringing about self sufficiency and financial independence via promoting entrepreneurship, the demand for microfinance loans in the communities had not gone down. The same individuals continued to borrow from the microfinance institutions year after year, not for the purposes of expanding or growing their businesses. These individuals apparently never achieved self sufficiency. In the worse scenarios, such as those in Andhra Pradesh, the individuals ended up in more debt than they were before joining the microfinance scheme. Borrowers found themselves in webs of microfinance debt. Whilst microfinance was built with the assumption that entrepreneurial ability is evenly distributed in populations as one of its cornerstones, entrepreneurship scholars do not share this view. Arguably the father of the contemporary study of entrepreneurship, Joseph Schumpeter, saw the entrepreneur as a unique character, distinct from the rest of the population. Schumpeter viewed the entrepreneur as very innovative and creative would hence bring about creative destruction via implementing innovations into the economy. Schumpeter s view of the entrepreneur contradicts that which lies at the foundation of microfinance thinking, that entrepreneurial ability is evenly distributed in a given population. Another very influential scholar who has shaped the way in which scholars understand entrepreneurship is Israel Kirzner. Kirzner sees the entrepreneur as an alert individual who can identify market inefficiencies. The market inefficiencies serve as the sources of entrepreneurial opportunity. Kirzner s entrepreneur then mobilizes to bring the economy closer to equilibrium. Whilst Kirzner and Schumpeter have different perceptions of the

10 entrepreneur and the entrepreneurial process, they both agree that entrepreneurial ability is not evenly distributed in any given population. Kirzner and Schumpeter both believe that the entrepreneur is a special individual and distinct from the rest of the population. Whilst microfinance practitioners believe that everyone in the population is an entrepreneur, Schumpeter and Kirzner would argue the contrary ( see Kirzner 1978; Schumpeter 1934). This questions the logic underlying microfinance. Another failure of microfinance, as has been its inability to promote high value forms of entrepreneurship. Microfinance has not been successful in facilitating entrepreneurship that has resulted in the creation of enterprises that have gone on to grow into businesses that served as social elevators for the entrepreneurs as well as creating value and opportunity for the community. The view that microfinance has failed to elevate poor people into more economically productive situations is shared by a growing number of scholars (e.g. Banerjee and Duflo 2011; Rugimbana & Spring 2009 ). Microfinance has increased the number of vegetable and fruit vendors on the streets but has not had success in facilitating high growth forms of entrepreneurship. Growing enterprises have more wide spread benefits in terms of social elevation and poverty alleviation when compared to other forms of enterprises. Growing enterprises are required by any economy as they provide the biggest source of employment and stimulate economic growth (Baumol 1990; Henderson 2002). Social value creation and the evaluation criteria of social enterprises Because of the unique nature of the goals and objectives that drive social entrepreneurship, it is not very clear on which criteria social entrepreneurship ventures such as microfinance can be evaluated and judged. Unlike profit oriented organizations that are driven by the profit motive and hence judged by the same criteria, social entrepreneurship ventures have societal

11 matters and objectives at the heart of their goals, and as expected, the evaluation mechanisms and criteria are elusive. How do we measure the success or failure of social entrepreneurship ventures? Social entrepreneurship ventures aim to create social value and hence social enterprises should typically be judged on social value creation. However, the definition of social value is highly contentious and context dependent. How do we define social value, operationalize and measure it? The measuring of social value is crucial for the evaluation of social enterprises. The matter of the evaluation of social ventures can no longer be sidelined as it is fast becoming the elephant in the room of social entrepreneurship. It would be naïve for scholars and practitioners to assume that no societal harm can come from social entrepreneurship ventures as was illustrated by the microfinance suicide epidemic in Andhra Pradesh. Nicholls (2009) attempted to tackle this enormous task as he too acknowledged that the thorny issue of the evaluation of social enterprises can no longer be avoided. Nicholls (2009) suggests that similar to other entrepreneurs, social entrepreneurs need to converge on some uniform reporting practices. This would improve transparency and would facilitate analysis and evaluation of social enterprises. Because of the absence of any reporting norms in social entrepreneurship, it is difficult, if not impossible to know what exactly the social, economic and broader impacts of social enterprises are as illustrated by the difficulty in determining the true or full impact of microfinance. Whilst microfinance was being celebrated across the globe, there were evidently problems in its own backyard. The full impact of microfinance remains unknown even today in part due to the absence of any unified form of evaluation criteria for social enterprises. The ethics and governance of social entrepreneurship Social entrepreneurship inherently carries an enormous ethical dimension. Whilst the ethical considerations driving social entrepreneurs have generally received positive attention, an

12 increasing number of scholars has begun to also highlight the ethical problems related to this. Whilst providing a typology of the social entrepreneur, Zahra et al. (2009) draw attention to the ethical challenges that dog the social entrepreneur. The biggest risk that Zahra et al. (2009) see is egoism on the part of the social entrepreneur. Entrepreneurs are driven by individualistic passions and there are always concerns that as the entrepreneurs pursue their interest and goals, the initial ethical considerations may be pushed into the background. Zahra et al.(2009) are concerned by an ends justify the means approach that they see as a significant risk in the case of social entrepreneurship. The matter of who governs the actions of the social entrepreneur is critical here. For profit enterprises have extensive governance mechanisms, both internal and external, that hold the entrepreneur accountable for their actions. However, the same cannot be said for the social entrepreneur. Whilst the conventional entrepreneur operates fundamentally in the markets and is hence governed primarily by the market mechanisms and mechanisms derived from the market, who governs the social entrepreneur? The social entrepreneur operates in a less clear domain. When the conventional entrepreneur deviates from their mandate, there are mechanisms that bring him/her to the book. Do these same mechanisms exist for the social entrepreneur? Who or what brings the social entrepreneur to the book when they deviate from their mandate and possibly begin causing societal harm? In the case of microfinance, when the first signs began to appear that there were some problems, whose mandate was it to bring the microfinance institutions and the responsible social entrepreneurs to the book? Social entrepreneurship theory has generally developed without paying much attention to the potentially dark side it may also have. The result has been the absence of corporate governance in social entrepreneurship discourse despite the fact that governance mechanisms may become necessary in the event of harmful social enterprises. When the social entrepreneur deviates from their mandate, there needs to be a mechanism to bring them to the book before they begin to cause harm. In some cases it may

13 not be the case that the social entrepreneur has deviated from their mandate but simply circumstances have changed and rather than creating social value, the entrepreneur begins to create what I term social dis-value for the lack of a better term. By changing circumstances, I mean the broad range of dynamic contextual factors that mediate or moderate the impact of the social enterprise on the society. Achleitner et al. (2012) recently produced a handbook for corporate governance of social enterprises in response to the growing need for more discussions on governing social enterprises. In their guide, Achleitner et al. (2012) acknowledge the highly complex nature of social enterprises and large variety that may exist in terms of governance structures. The controversies involving Prof. Yunnus and the Bangladeshi government in 2011 highlight further questions related to the governance of social entrepreneurs. The government of Bangladesh argued that constitutionally the retirement age for the heads of banks is 65 and as such Prof. Yunnus who at the time was already 70 should leave his post as the head of the Grameen Bank. Prof. Yunnus argued that the circumstances surrounding his presence as the head Grameen were unique, possibly by virtue of him being a social entrepreneur. The matter of whether Yunnus should have stayed longer or not as the head of Grameen is not the issue I am concerned with here. The issue is rather the question of who has the legitimate right to tell Prof. Yunnus to leave or stay. In essence this is a question about the governance mechanisms for social ventures and the entrepreneurs behind them. Should, Prof. Yunnus, by virtue of being a social entrepreneur, be governed by a code that differs from conventional entrepreneurs? This highlights a blind spot in terms of social entrepreneurship theory. A grey area exists when it comes to the matter of the governance code by which the social entrepreneur should be bound.

14 The societal problem Discourse on social entrepreneurship often makes reference to the identification of a societal problem by the social entrepreneur who then mobilizes to address the problem in an innovative manner (Austin et al. 2006; Leadbeater 1997; Zahra et al. 2009). Some social entrepreneurs will attempt to solve societal problems whilst at the same time pursuing profit interests whilst others pursue the societal problem only, both being defined as social entrepreneurs by virtue of their creativity and alertness and mobilizing to address societal problems (Mair & Marti 2004; Zahra et al. 2009). The problem with this perception of social entrepreneurship is its overly simplistic depiction of the nature of the society and societal challenges or problems. This perception makes the assumption that there is consensus on what the societal challenges or problems actually are. In the case of the conventional entrepreneur, we know that he or she is pursuing self interest with primarily a profit motive (Schumpeter 1934). In the case of the social entrepreneur, the entrepreneur attempts to solve societal problems and in process create social value as well as economic value in some cases (Zahra et al. 2009). The challenge is how to define the social problem to be addressed by the social entrepreneur. Whilst social entrepreneurship theory regularly makes reference to the solving of a social problem or problems by the social entrepreneur, little attention is given to the definition of the social problem. Does the social problem exist in an absolute sense as is often implied by social entrepreneurship scholarship or can it be more complicated than that? The case of microfinance illustrates this complexity well. What societal problem did microfinance attempt to solve at its inception? As has been stated microfinance sees the problem as the absence of entrepreneurship among the poor. However, was the real problem the absence of entrepreneurship among the poor or the absence of high value entrepreneurship among the poor? What is the bigger societal challenge that needs to be addressed? Microfinance has increased the number of people selling tomatoes by the roadside but has not

15 increased the number of high growth successful businesses within the community. We know that high growth entrepreneurship is crucial for economic growth, employment creation and poverty alleviation. This idea is supported by an article written in the New York Times by Dr. James Surowiecki in 2008 who stated that: What poor countries need most, then, is not more microbusinesses. They need more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation. In high-income countries, these companies create more than sixty per cent of all jobs, but in the developing world they re relatively rare, thanks to a lack of institutions able to provide them with the capital they need. It s easy for really big companies in poor countries to tap the markets for funding, and now, because of microfinance, it s possible for really small enterprises to get money, too. But the companies in between find it hard. It s a phenomenon that has been dubbed the missing middle. In its fight against poverty, should microfinance be encouraging more vegetable vendors or more growth oriented businesses? This dilemma is not only the dilemma of microfinance but a dilemma that faces social entrepreneurship. As I have already queried, whose definition of the societal problem is relevant? Whilst entrepreneurship has been consistently linked with economic growth, not all forms of entrepreneurship are beneficial (Baumol 1990). The idea that high growth entrepreneurs are key for economic growth and development is a widely accepted one. Productive forms of entrepreneurship are of greater benefit to the society and economy. The high growth entrepreneur is an essential component of the engine that drives economies forward. At the local level, growth oriented entrepreneurs will create jobs, lift local incomes and generate wealth. Fostering high growth entrepreneurs will result in the creation of value for the community (Henderson 2002). In developed countries it has long been known and stated that the biggest creators of employment and contributors to the economy are high growth

16 entrepreneurship firms and policy makers have long been encouraged to nurture this form of entrepreneurship (Stam et al. 2007). (Aerni 2006) shares the views presented by Henderson (2002). Aerni (2006) discusses high growth entrepreneurship in an African context. Aerni (2006) goes beyond just arguing that the high growth entrepreneur is important for the economy and goes further to argue that in the case of developing countries, encouraging growth oriented entrepreneurship, will also contribute to bringing about much needed political reform. Aerni (2006) suggests that true political reform can only come endogenously, from the locals not driven by external forces. Successful growth oriented entrepreneurship would contribute to the development of an empowered middle class that would then in turn drive the political reform agenda. The emergence of good governance would further contribute a great deal to poverty reduction and to economic growth of many African countries. The prevalence of high growth firms has further benefits above and beyond creating employment and their role is given greater importance by the Knowledge Spillover Theory of Entrepreneurship that posits that entrepreneurial knowledge created in firms is not all commercialized and as a result there are knowledge spillovers that would be a source of entrepreneurial opportunity for the surrounding community (Audretsch & Keilbach 2007). This would see an increased level of high value entrepreneurial activity. This is particularly true for knowledge intense environments in which greater level of entrepreneurship were observed. If microfinance were to successfully identify strong pockets of potential high growth knowledge intensive entrepreneurial activity and to support and nurture these, we can anticipate knowledge spillovers. Pockets of this nature are likely to lie in places such as research centers and universities. The mechanism of knowledge spillover may be via social networks, movement of employees, or structure and planned spillovers. This would create great value for the communities as well as stimulate economic growth.

17 As I have illustrated in the preceding paragraphs, one can easily argue that what the poor communities need the most are high value forms of entrepreneurship rather than necessity microenterprises such as those facilitated by microfinance. The societal problem could instead be seen as being the absence of high growth entrepreneurship which would be in direct contradiction with the societal problem that drives microfinance. This highlights the grey area that exists when it comes to the societal problem contrary to way it is often depicted in social entrepreneurship. When social entrepreneurship scholars make reference to a societal problem that is being solved by the social entrepreneur, whose definition of the societal problem do they have in mind? What may appear to be a problem that needs solving to the social entrepreneur may in fact not be a problem at all for the community concerned. Unstable marriage Zahra et al. (2009) heed the warning of other scholars who warn that social entrepreneurship is a result of the marriage between two values that directly oppose each other. Social entrepreneurship brings societal issues and entrepreneurial venture together. This is typically an unstable marriage. The tension between these conflicting logics that social entrepreneurship attempts to unify is manifest in the outcomes of social entrepreneurship ventures. Growing emphasis on efficiency models has often been said to be responsible for the negative effects of social entrepreneurship. The focus on efficiency based models may shift the initial goals of the social entrepreneur to goals that may actually not be in the best interests of the society. The aggressive loan collection methods employed by microfinance loan collectors that have been increasingly documented are an example of this. These aggressive loan collection methods may have contributed to the microfinance related suicides in India.

18 Conclusion and Summary In this chapter I have discussed social entrepreneurship and used microfinance as an empirical setting that serves to inform us about social entrepreneurship as a whole. The chapter has highlighted several questions related to social entrepreneurship theory that need to be addressed. These questions are not the only questions that need to be asked. They are just some of the questions that need to be asked and answered by social entrepreneurship theory. Knowing the impact of social enterprises is difficult as social enterprises aim to create social value and measuring social value creation is not yet an issue social entrepreneurship scholars have actively engaged. The absence of reporting practices makes it almost impossible for transparency and comparability of social enterprises. It would be naïve to work with the belief that all social enterprises have beneficial outcomes for the society as evidenced by the microfinance related suicides in Andhra Pradesh. The potentially dark side of the ethics related to social entrepreneurship has often been ignored but this is a matter a growing number of scholars have begun to highlight. The matter of the ethics of social entrepreneurship is closely related to the governance of social enterprises which is currently an obvious blind spot in terms of theory. The case of microfinance serves as a case in point. To whom are social entrepreneurs accountable? Whilst the conventional counterparts of the social entrepreneurs and brought to the book by the market forces, who or what regulates the social entrepreneur. Discourse on social entrepreneurship is filled with references to the social problems that social entrepreneurs identify and then mobilize to address. However I have argued that the implicit assumption in this is that there is consensus on what the social problems may actually be. Whose definition of the societal problem should drive the social entrepreneur? Furthermore, there is even less consensus on what the solutions to the societal problems are. It is reasonable to assume that there are cases in which what appears to be a problem to the

19 social entrepreneur is actually not a problem for the society. The case of microfinance illustrates this well. Whilst they may be general consensus that the broader problem is poverty among the poor, there is less consensus if the cause of this poverty is lack of entrepreneurship among the poor or lack of high value entrepreneurship among the poor. Microfinance advocates for the former and promotes the establishment of microenterprises by the poor despite that the fact that it is known that what communities need most is high value entrepreneurship. Whist social entrepreneurship shows great promise, there are blind spots in terms of theory and practice that need to be addressed, as is typical of a young research agenda. The concept of social entrepreneurship has excited the media and practioners and in some senses has grown without a great deal of reflection.

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