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Social vs. Commercial Enterprise: The Compartamos Debate and the Battle for the Soul of Microfinance

Published 30 Sep 2009
Reference 5627
Region Global
Summary

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..

Teaching 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:

Keywords
  • microfinance
  • poverty alleviation
  • debate
  • banking
  • social business
  • corporate responsibility
  • RD0909
  • AR2009
  • AR0910