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Social vs. commercial enterprise: the compartamos debate and the battle for the soul of microfinance

Author: Carrick-Cagna, Anne-Marie ; Santos, Filipe M.INSEAD Area: Entrepreneurship and Family EnterprisePublisher: Fontainebleau : INSEAD Social Innovation Centre (ISIC) 2009.Language: EnglishDescription: 15 p.Type of document: INSEAD CaseNote: Latest version available via https://publishing.insead.eduAbstract: The Mexican microfinance bank Compartamos Banco took the industry by surprise in 2007 with a successful IPO that valued the bank at more than US$1 billion. Although it was not the first listing of a microfinance organisation, the 10,000% rate of return for the initial investors and managers created controversy as many believed that these returns were possible because of the high interest rates charged to poor borrowers. This controversy divided the microfinance industry and still rages today. The case tells the story of Compartamos and its IPO, and outlines the different arguments from both sides, setting the scene for a lively debate-style session.Pedagogical Objectives: The case uses the Compartamos debate as a basis to discuss the effectiveness of social vs. commercial enterprise models in addressing societal problems on a global scale. Based on the case, students are asked to take a position on the following: “Do you believe that the most effective way to alleviate poverty on a global scale is to increasingly transform microfinance into a commercial proposition or to maintain the social mission that characterised microfinance’s origins?” “What central arguments support your position?” The debate style structure suggested for the session will enable students to questions their beliefs about business and explore the mechanisms and processes of value creation in society.
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Latest version available via <a href=https://publishing.insead.edu>https://publishing.insead.edu</a>

The case uses the Compartamos debate as a basis to discuss the effectiveness of social vs. commercial enterprise models in addressing societal problems on a global scale. Based on the case, students are asked to take a position on the following: “Do you believe that the most effective way to alleviate poverty on a global scale is to increasingly transform microfinance into a commercial proposition or to maintain the social mission that characterised microfinance’s origins?” “What central arguments support your position?” The debate style structure suggested for the session will enable students to questions their beliefs about business and explore the mechanisms and processes of value creation in society.

The Mexican microfinance bank Compartamos Banco took the industry by surprise in 2007 with a successful IPO that valued the bank at more than US$1 billion. Although it was not the first listing of a microfinance organisation, the 10,000% rate of return for the initial investors and managers created controversy as many believed that these returns were possible because of the high interest rates charged to poor borrowers. This controversy divided the microfinance industry and still rages today. The case tells the story of Compartamos and its IPO, and outlines the different arguments from both sides, setting the scene for a lively debate-style session.

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