The Case Study for Banco Compartamos

Introduction

The case study for Banco Compartamos explored challenges that face microfinance institutions and how they limit them from meeting their mission. Banco Compartamos an international bank which serves the Latin Americans on the issues of finance and social responsibility experiences such an issue creating problems not only to the firm but also to society. This means that the firm operates to meet the interests of people but it is not limited to maximizing its profits. The central issue of the case is the poor customers whose needs get worse from day to day. The issue of poverty among other issues marks a central juxtaposition of social and commercial debate (Carrick-Cagna & Santos, 2009). However, some other problems that face commercial institutions are the inability to compare standards of operations between various Micro Financial Institutions (MFIs).

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The functional model for most microfinance institutions emerges from the competition within the market. Different micro-finance institutions (MFIs) compete in the market by lowering the price of interest rates for loans acquired (Carrick-Cagna & Santos, 2009). The general public gets access to the microfinance products which later increase economic welfare. Notwithstanding this analogy, they transition from the roles of social welfare to commercial orientation for the fact that, the people pay the loans with increased interest rates. The shift of roles that is, from social welfare to maximization of profits created many problems ranging from the market, finance, and personnel. The problems are underpinned under the management body which has the responsibility to make decisions on the issue of sticking to the firm's objectives.

Banco Compartamos main goal is to create a sustainable social environment that ensures the applicability of social responsibility is reached with the objective of arriving at the social mission. This means meeting the interest of the many general public by reducing problems of poverty and creating a community that serves to create a healthy environment. However, the inconsistency between the firm's goals with what is on ground diverts it from meeting its objectives. Banco Compartamos, prioritized financial gains disregarding the main goal that is was supposed to achieve that is the outreach of the poor customers (Carrick-Cagna & Santos, 2009). The failure to boost social mission led to poverty which is a real issue. It is, therefore, a complication for many microfinance and investors on drifting from commercial orientation to the combination of social and commercial activities.

There are different constraints which resulted in the poverty to the poor problem Banco Compartamos is experiencing (Carrick-Cagna & Santos, 2009). For instance, strong microfinance competitors resulted in lower prices, reduced profits of microfinance institutions leading to a pool of the poor customer's access to the financial products. This finally increased the interest rates leading to exploitation of the common public in the name of maximizing profits. Consequently, the relationship of Banco Compartamos management with the customers created the central problem poverty. The firm realized that it was exploiting the poor customers but due to profits received, they forgot their goals in the market and created a new vision of targeting one million customers. Personnel limitation also paved a leeway to the creation of the central problem. Banco Compartamos sold most of its shares with other commercial investors and most of its shares was the mainstream of fund managers. It is clear that managers should assist to make decisions in any firm to ensure that, goals are followed in order to achieve the purported objectives. It is, therefore, a contrary for the Banco microfinance hence the creation of the serious problem.

According to recent studies solution to the constraints can be explored from different perspectives (Santos, 2012). To start with a competitive market, Banco Compartamos should identify all monetary finance institutions are leverage the interests rates used so that a general price which can be unique will be used. This will ensure that there is no an influx of prices which can lead to profits making the microfinance institution to forget its goal in the business. At the same time, it will assist eradicate poverty. In another approach, the solution to creating a good relationship between the firm and its customers can emerge through organized forums to advocate for the voice of customers. This starts with customer's complaints when they first realize the intentions of the firm. This can be done by migrating to other microfinance institutions and making all people aware including the investors about the change in the roles of the microfinance. Limitations to personnel can also be addressed by giving employees and managers a voice to air their views and an opportunity to play their roles in the business.

Conclusion

In conclusion, microfinance institutions are not like any other charity platforms but they are an arena where the poor get empowered on how to borrow, invest and save. In the same parallel, their institutions play a role in ensuring that community problems such as social conditions are addressed including natural disasters in order to create a sustainable environment. Banco had the same goals of being useful to the poor households but the goals shifted due to poor management in the firm. Microfinance should mean a permanent change in the community by the innovative criterion of creating opportunities and ensuring that people in the community are empowered.

Carrick-Cagna, A. M., & Santos, F. (2009). Social vs. Commercial Enterprise: The Compartamos Debate and the Battle for the Soul of Microfinance, INSEAD. Google Scholar.

Santos, F. M. (2012). A positive theory of social entrepreneurship. Journal of business ethics, 111(3), 335-351.