Reputation and communication in microfinance

CMF Research Associate: Amy Mowl
CMF Intern: Carissa Page
Timeline: Completed in October 2006

Microfinance Institutions (MFIs) are often subject to misunderstanding from the public, suspicion from local politicians and destructive and ill-informed rumors from competing MFIs. Indeed, during the March 2006 "crisis" in Andhra Pradesh, MFIs were the object of very negative articles in the press (mostly regarding allegations of hidden charges and usurious interest rates).

Given this context, it is critical to understand the reputation of MFIs among various stakeholders, to which extent this reputation is negative and why these reputations are formed. It is also critical that MFIs improve transparency, streamline their operations and develop communications skills to help protect themselves against defamation and misinformation.

To better understand these issues, the following study was conducted on the politico-cultural context in which MFIs operate in Orissa. Orissa was chosen as the focus for this study because in this state, the microfinance sector remains in a nascent stage, but in recent years has been experiencing rapid growth and mounting competition.

At this turning point, this study seeks to understand how the press, local politicians and other MFIs perceive these emerging MFIs, how these perceptions are formed, and what impact it has on MFI operations. The study concludes with several recommendations for how MFIs might improve their communications strategy, work together on issues of mutual interest and better navigate the external world in which they operate.

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