What is Responsible Finance?

The world of banking used to be very simple: On one hand, there were commercial banks and investors having the ultimate goal of profit-maximisation, and on the other hand, there were microfinance institutions (MFI) and donor organisations focussing on financial inclusion and social or developmental impact.

However, this distinction became increasingly blurred within the last years. Why have some commercial banks started publishing social responsibility reports? Why do microfinance institutions advertise flat interest rates ? What is the motivation of private investors who invest in microfinance?

Looking for a term to capture these developments, we realised that they revolve around the concept of "responsibility". While the exact definition of this concept varies according to context, in general, it stands for developmental aspects (social and environmental impact, sustainability) that relate to ethical standards, or aspects of public goods, or both.