Is it Immoral to Profit From the Poor?

A pair of IPO stories from opposite sides of the globe this week has led some to question the ethics of profiting from the poor. Very few, even among market observers, likely made any connection this week between the IPO stories of U.S.-based Green Dot, a pre-paid debit card company, and SKS Microfinance of India. However, the two have something in common; both are companies that provide services that benefit the poor. And, particularly in the case of SKS, this has caused some to ask the moral question of whether it is moral or ethical to profit from the poor.

Green Dot is a pre-paid debit card company, meaning that buyers of the product can put cash onto it, either at retail locations or often by direct deposit. Pre-paid cards are intended to be a substitute for credit cards, which have higher recurring costs and interest charges. Because of this, they are typically marketed toward, and utilized by, the lower income, or unbanked segment of society, though that is not exclusively the case. SKS is a microfinancier, or a lender which focuses on very small loans to those who would not otherwise have access to banks or other lending resources. This allows people, mostly in rural areas of developing countries, to start small businesses or projects that would otherwise be impossible. Green Dot successfully IPO'd this week, while SKS should follow by the end of the month.

While not many have questioned what Green Dot is doing, perhaps reflecting the attitudes of its home country, SKS has faced some criticism for trying to profit from, rather than help, the poor. Despite Green Dot not facing as much heat, one could submit that, as this is a moral question, and both companies profit from the underprivileged, that both are in the same boat. Which returns us to the moral question itself; namely, is it immoral or unethical to profit off of the poor.

Answers, as with many such questions, are difficult to come by. That is the nature of a question that can only be answered by using not just logic, but gut feelings shaped by environment, years and generations of experiences, religion, upbringing...the list could easily go on almost indefinitely. However, one answer, and one that is undoubtedly shaped by my own life in a mostly free-market country under representative government. That is that it is moral to profit from the poor if you are able to help more of them by doing so and are doing so in a way that provides them with opportunities they would not otherwise have had.

This may be an oversimplification, and could indeed be considered naive or perhaps idealistic. However, there are many people in the world who don't have many options, but do have great work ethic, ideas and potential. No matter how big governments get, this will always be the case to some extent. So why not let capital markets go to work? Whether it is pre-paid debit cards with a fee, but a fee that does not carry the threats of charges, interest rate risk and hurting credit ratings, or it is microfinance, at a cost, but a lesser cost than would otherwise be (or maybe not be) available, both are valid methods to help the underhelped. And if it takes a profit motive to bring people into such areas, is that really so bad?