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Gender Differences in the Repayment of Microcredit: The Mediating Role of Trustworthiness
Abstract
Growing evidence suggests that women are more likely to repay collateral-free microloans than men. However, we know little about what explains such gender differences. We hypothesize that better repayment performance of women microcredit borrowers can largely be explained by gender differences in innate trustworthiness. We conduct a trust game and a microloan repayment game in rural Bangladesh. We find that women are more trustworthy than men and that they are more likely to repay their loans irrespective of any control mechanisms, such as joint liability or dynamic repayment incentives. The results of a mediation test suggest that the gender effect on loan repayment is significantly mediated by differences in innate trustworthiness. We conduct a sensitivity test to check the extent to which unobserved confounders might have influenced the mediation effect, and find no evidence of significant omitted variables bias.
... However, accredited empirical studies showed that not only is this claim rather groundless, but quite the opposite is true. Particularly, field studies performed in less developed countries provided evidence that loan repayment rates are higher for women than for men (see, for example, D'Espallier et al., 2017;Hansen et al., 2021;Kevane & Wydick, 2001;Sharma & Zeller, 1997), either thanks to females' innate trustworthiness (Shahriar et al, 2020), 7 or because, especially in poor countries, women have very limited mobility compared to men (Armendáriz & Morduch, 2005;Morvant-Roux, 2011). Having less mobility and not having the financial capacity to relocate, women are often trapped in a place where pressure and humiliation are greater if they do not repay their loans. ...
... Specifically, in a typical lending relationship with asymmetric information, the lender shows trust by accepting the risk that the borrower may strategically default, while the borrower shows trustworthiness by repaying the loan (Becchetti and Conzo, 2011;Saparito et al., 2004). Previous studies in the microfinance ambit found a positive association between trustworthiness and loan repayment rates (see, Shahriar et al., 2020;Karlan, 2005;Cassar et al., 2007;Cassar and Wydick, 2010 Based on these considerations, we formulate the following hypothesis: ...
... We found a positive effect of the depth of social sustainability in the form of loan provision to female borrowers on financial sustainability, not unlike what emerges from similar analyses on MFIs outside the European context (Aubert et al., 2009;Goetz & Gupta, 1996, among others). This may be due either to the inherent disparities between men and women, which may explain why women are more likely to repay their debts thanks to their innate trustworthiness (Shahriar et al., 2020;Becchetti & Conzo, 2011;Cassar et al., 2007;Cassar et al., 2007;Karlan, 2005;Saparito et al., 2004), or because of their inability to relocate to escape the social stigma related to missing loan repayments (Armendáriz & Morduch, 2005;Morvant-Roux, 2011). In particular, from our analysis, the observed effect emerges to be stronger for Eastern European MFIs, smaller and less regulated institutions, mainly providing personal loans. ...
Plain English Summary
European Microfinance Institutions that more tightly pursue social objectives are also more likely to be financially sustainable but are penalized by regulatory restrictions on interest rates.
The microfinance sector underwent a significant global expansion in recent years, creating chances for underprivileged and vulnerable groups, particularly women entrepreneurs, to start their businesses. The balance between social and financial sustainability is one of the most hotly debated themes in a growing number of studies, although there is little empirical evidence on the European microfinance sector. In this paper, we provide one of the first pieces of evidence of this relationship in the European context. Our findings have important implications for researchers, policymakers, and society as a whole. The research reveals that European Microfinance Institutions (MFIs) that more tightly pursue social objectives are also more likely to be financially sustainable. Furthermore, smaller MFIs appear to achieve a double bottom line more easily, especially targeting higher shares of women borrowers. The critical aspect of European MFIs appears to be their greater reliance on subsidies, as well as a regulation that is ill-suited to the microfinance sector, especially regarding interest rate caps. Thus, a more structured regulatory framework focused on social sustainability variables could improve microfinance effectiveness in the coming years.
... Much has been written relating micro-credit and trust in recent decades (e.g., see Aggarwal et al., 2015;Augustine, 2012;Barboza, 2019;van Bastelaer & Leathers, 2006;Chen et al., 2019;Epstein & Yuthas, 2011;Haldar & Stiglitz, 2016;Huda, 2020;Ojong, 2017;Ojong & Simba, 2018;Panda, 2016;Postelnicu & Hermes, 2018;Shahriar et al., 2020;Uddin, 2014). Much is still unknown about the nature of micro-credit trust. ...
... This study makes three novel contributions to the micro-credit literature. First, whereas previous studies have only explored the relationship between micro-credit and trust from social science's perspective (e.g., see Aggarwal et al., 2015;Augustine, 2012;van Bastelaer & Leathers, 2006;Chen et al., 2019;Epstein & Yuthas, 2011;Ojong, 2017;Ojong & Simba, 2018;Panda, 2016;Shahriar et al., 2020), this study, examines it through a philosophical lens, albeit depending on the past empirical evidence and analysis found in the social science literature on micro-credit (e.g., see Al-Amin & Islam, 2020;Fernando, 2006b;Guérin, 2014;Karim, 2008Karim, , 2011Muhammad, 2009;Rahman, 2001;Selinger, 2008). Hence, it is both applied and interdisciplinary. ...
... But I go deeper, adding to the existing micro-credit literature by linking micro-credit NGOs' trust to the harms it causes to Bangladesh's native social solidarity norms. This is a novel contribution because previous research has only linked micro-credit trust to social identity (see, e.g., Aggarwal et al., 2015;Chen et al., 2019;Shahriar et al., 2020) or showed the critical role of trust in micro-credit success (such as see, e.g., Epstein & Yuthas, 2011;Ojong, 2017;Ojong & Simba, 2018;Panda, 2016). This paper is also unique in that it uses a philosophical framework to examine micro-credit trust, as opposed to prior studies that have used social science frameworks. ...
This study contributes to the micro‐credit literature by addressing the lack of philosophical dialogue concerning the issue of trust between micro‐credit NGOs and rural poor women. The study demonstrates that one of the root causes of NGOs’ contested roles in Bangladesh is the norm that they use (i.e., trust) to rationalize their micro‐credit activities. I argue that Bangladeshi micro‐credit NGOs’ trust in poor village women is not genuine because they resort to group responsibility sustained through aggressive surveillance. I maintain so by drawing on a trust‐based theoretical framework that uses various philosophical insights. Drawing on the same conceptual framework, I also contend, somewhat softening the previous claim, that if micro‐credit trust is trust at all, it is at most strategic, not generalized. For being strategic, it has many undermining effects on local social solidarity norms, rendering Bangladeshi micro‐credit NGOs and strategic trust an odd couple with no moral compass. To bring forth the moral impetus in micro‐credit activities, I lay out some recommendations intended for organizations, managers, and policymakers, consistent with normative corporate social responsibility initiatives. However, further studies can be initiated based on this paper, suggesting its importance for future research.
... Xu et al. (2022) also detect a greater propensity towards compulsive buying among women than men when they have one or more credit cards. However, there is opposite evidence in Shahriar et al. (2020) who find more inclination to repay microloans among women than men. Individuals' age may be a factor that modifies their beliefs regarding the behavior they exhibit over time. ...
... Consequently, there is no evidence of gender gaps in this matter. We also confirm the diversity results that exist in the literature that favors either men or women (Li et al., 2019;Madeira, 2014;Shahriar et al., 2020;Xu et al., 2022). This result is useful to carry out public policies aimed to harmonize credit conditions between men and women. ...
Purpose
This paper aims to analyze decisions about payment rates on credit card statements by using background factors and perceptions that indirectly influence beliefs, according to the theory of planned behavior.
Design/methodology/approach
Since legal and institutional frameworks and household financial surveys are heterogeneous among countries, household data on the Chilean economy is used as the starting point in this matter.
Findings
The probability that an individual chooses to pay amounts less than the total billing of their credit cards rises with essential variables related to perceived behavioral control. Being the head of the household, being younger, perceiving a high or excessive financial burden of debt and facing unfavorable and unexpected situations that divert the budget, among others, are relevant to repayment decisions.
Originality/value
The novelty of this article is that its psychological approach differs from the traditional focus of economic rationality regarding credit cards. The results are relevant for policymakers and financial regulators due to implications for household behavioral finance and means of payment.
... Regarding client gender, it is argued that men are more likely to default on a microloan, while a portfolio with a higher share of women may have a lower default risk (Shahriar et al., 2020). On the other hand, a client with a large household is more prone to default, as he or she prioritizes family welfare in terms of health and food before the payment of financial obligations (Bekerman and Ozomek, 2003;Vargas and Mostajo, 2014). ...
... Other studies have also implemented microeconomic variables like gender, marital status, family size, reason for loan, amount and number of installments (González, 2010;Monsalve, 2009). Research by Chakravarty, et al., (2013) and Shahriar, et al., (2020) suggests that the average repayment rate of women is significantly better than male clients, due to decision making and planning. This analysis can be performed by separating the loan portfolio between female and male clients, or by using dummy variables that measure the effect of each type of client, as is done in this research. ...
The most recent Economic Report of the Inter-American Development Bank ranks Costa Rica as the second country in Central America with the highest household indebtedness, and almost half of households have no savings. These conditions have led to increases in the default rates of loan creditors. This research analyzes the factors affecting default in a Costa Rican Microfinance Institution that grants microcredits to individuals and small businesses without access to traditional bank financing. An econometric approach with panel data was applied and the results show that default is affected by autoregressive components and the financed activity. The application of these methodologies allows strengthening credit analysis and the selection of market niches to mitigate the default risk.
... This is the largest among all the eight clusters, it consists of 31 articles related with access to and constraints on microcredit for SMEs. The three most cited articles on this cluster are Chandio et al. [26], Nguyen et al. [27], Shahriar et al. [70] Gender differences in the repayment of microcredit: ...
... It has also been found that alliances between SMEs and large companies do not have a major impact on overall creditworthiness, but do affect SME collateral and terms [67,68]. Likewise, trustworthiness in microfinance is linked to gender differences, for example, female micro-borrowers have a better repayment record than male borrowers [70]. Similarly, it was found that in post-conflict communities in sub-Saharan Africa, social cohesion was used as a tool of social protection and as a safety net when female MSME borrowers lacked collateral and property rights [69]. ...
This article aims to present current research trends in microfinance for small and medium enterprises (SMEs) and microfinance institutions (MFIs), as microfinance plays an increasingly role in entrepreneurship development and poverty alleviation. The study uses a bibliometric analysis, in this work, we performed citation, bibliographic coupling, and keyword evolution analyses. The results show that research in microfinance for SMEs and microfinance institutions continue to grow. The authors found that recent research in microfinance for SMEs and microfinance institutions has evolved around eight thematic clusters, covering (1) access to and constraints on microcredit for SMEs (2) microfinance and economic empowerment, (3) sustainability of MFIs, (4) creditworthiness, microfinance technology infrastructure and financing patterns, (5) Islamic financial inclusion, (6) credit assessment models for microcredit, (7) microfinance and innovative business models, and (8) gender and equity crowdfunding. Research gaps in each of the thematic clusters are identified. Topics related to COVID-19, Islamic social finance, microfinance institutions, credit scoring models, crowdfunding, and entrepreneurial finance are likely to feature in the domain of microfinance and sustainability of MFIs in future.
... Santandreu et al. (2020) found that microcredit repayment behavior is better for females than males. Shahriar et al. (2020) identified that females are more honest than males and are more likely to pay more loans. ...
... So, women are more honest in paying the loan than male borrowers. The same type of conclusion was derived by Khan and Dewan (2017), Johnson (2005), Shahriar et al. (2020), and Glackin (2002). Pay on time means using loan amounts in the appropriate and productive sector. ...
The impact of gender participation on the maturity of crossed-due loans is observed in this study. Furthermore, the associations between maturity of crossed-due loans, their number, and loan issued on physical collateral and collective bail are also monitored using the unbalanced panel data of thirty microfinance companies. The study investigates the short- and long-term link between response and predictor variables. It is founded on an exploratory and descriptive research design. The Hausman test, fixed effect or LSDV model, Pedroni and Kao co-integration test are used to observe the relation and impact. The maturity crossed due loan number, total loan amount, loan issued against physical collateral, and loan allocated on collective bail are jointly significant to determine the maturity of crossed due loan amount of microfinance companies of Nepal. It is found that women are more conscientious in repaying loans on time compared to male borrowers. Per rupee 0.382 rupees, a maturity crossed due loan is found in microfinance companies where only women can borrow, but per rupee 0.404 rupees, a time crossed due loan is found where men and women can borrow. Policymakers of banks are not necessarily hesitant to provide loans to female borrowers.
... This hypothesis is based on a large stream of prior empirical literature that documents that female borrowers are more likely than male borrowers to repay their loans (D'Espallier et al., 2011;Kevane & Wydick, 2001;Sharma & Zeller, 1997;Khandker et al., 1995). One reason cited for higher repayment rates among female borrowers is that they are more trustworthy than male borrowers (Shahriar et al., 2020). Another reason cited for higher repayment rates among female borrowers is that they are more likely to repay because they want to ensure continued access to credit by maintaining their reputation as creditworthy borrowers (Hashemi et al., 1996;Morduch, 1999;Armendariz & Morduch, 2007). ...
... 4 Prior literature, for example, considers the trustworthiness of females as an important reason for higher repayment rates among female borrowers (Kosfeld et al., 2005;Zak et al., 2005;Carter, 2007). Based on data provided by Bangladeshi MFIs, Shahriar et al. (2020) show that better repayment performance by female borrowers can be largely explained by gender differences in innate trustworthiness, in which females dominate. Chakravarty et al. (2013) also conclude that female borrowers are naturally more adept at credit risk than male borrowers. ...
The paper uses the data on 1212 microfinance institutions in 106 developing countries to document the impact of gender diversity on boards and gender diversity among borrowers on nonperforming loans (NPLs) during the period 2010–2018. The results show that microfinance institutions with a higher proportion of female borrowers have fewer NPLs than otherwise similar microfinance institutions with a lower proportion of female borrowers. Regarding female board members, the results show no relationship between the proportion of female board members and NPLs. The findings remain qualitatively the same after several sensitivity checks. We also show that characteristics specific to microfinance institutions moderate the relationship between gender diversity and NPLs.
... Microcredit represents a powerful tool to enhance livelihoods, reduce poverty and increase financial inclusion for those without the collateral that provides access to lending by conventional financial institutions. Women, despite being highly vulnerable, especially in Bangladesh where the World Economic Forum Global Gender Gap Index (World Economic Forum (WEF) 2020) reveals a rank of 141 from 153 countries in terms of Economic Participation and Opportunity, have been found to utilize microfinance loans more beneficially for family resilience than males (Dzanku 2019) and also to exhibit higher relative repayment rates (Armendáriz and Morduch 2010;D'Espallier et al. 2011;Shahriar et al. 2020). This latter feature is thought to be due to the innate trustworthiness and collaboration developed within female groups by the social capital inherent in the group lending model adopted by many MFIs, including in Bangladesh (Berge et al. 2016;Shahriar et al. 2020). ...
... Women, despite being highly vulnerable, especially in Bangladesh where the World Economic Forum Global Gender Gap Index (World Economic Forum (WEF) 2020) reveals a rank of 141 from 153 countries in terms of Economic Participation and Opportunity, have been found to utilize microfinance loans more beneficially for family resilience than males (Dzanku 2019) and also to exhibit higher relative repayment rates (Armendáriz and Morduch 2010;D'Espallier et al. 2011;Shahriar et al. 2020). This latter feature is thought to be due to the innate trustworthiness and collaboration developed within female groups by the social capital inherent in the group lending model adopted by many MFIs, including in Bangladesh (Berge et al. 2016;Shahriar et al. 2020). ...
The regulation of microfinance services is likely to have a wide-ranging influence on the microfinance sector, particularly on institutions and their clients. This paper reveals the impact of a specific regulatory regime, the "Microcredit Regulatory Authority Act, 2006", enacted by the Bangladesh government to monitor and supervise nonprofit nongovernment organizations (NGOs). We analyzed survey and interview data provided by clients of both nonprofit microfinance institutions (MFIs) registered under the Act and nonprofit institutions that are unregistered, all lending only to women. Client-level analysis using fixed effects for specific MFI membership is applied, focusing on the role of regulation by comparing protections as consumers of financial intermediations in terms of financial literacy, awareness, and status of clients of registered and unregistered MFIs. We found compelling evidence of a positive association between the financial status, financial literacy, and financial awareness of clients of registered MFIs, but not unregistered MFIs. These findings support the need for MFIs to implement consumer protection measures and inform their consumers about key issues to achieve improved client outcomes.
... A tendency to trust female speakers more was observed for the Canadian and foreign accents in Block 1, and as a main effect in Block 2. This is consistent with studies describing a tendency of females to be more trustworthy (Aggarwal, Goodell, & Selleck, 2015;Buchan, Croson, & Solnick, 2008;Shahriar, Unda, & Alam, 2020). Note, however, that this was not always the case, as in some conditions (the Australian accent for all confidence levels and the Canadian accent in the confident condition), males were trusted more or no differences due to speaker sex were found. ...
... The results of both experiments suggest that female speakers had a slight advantage in engendering listeners' trust, but data also suggested the possibility of subtle interaction effects. In some contexts, females have been found to be more trustworthy (Aggarwal et al., 2015;Buchan et al., 2008;Shahriar et al., 2020), which may partially explain results. Despite this, it is not clear that people take into account the sex of the receiver into consideration for making trust decisions (Orbell, Dawes, & Schwartz-Shea, 1994), and research using meta-analytic approaches has suggested that sex effects tend to vanish when pooling together results from multiple studies, or that that they can be detected only in statistic interaction patterns (Balliet, Li, Macfarlan, & Van Vugt, 2011). ...
People often evaluate speakers with nonstandard accents as being less competent or
trustworthy, which is often attributed to in-group favoritism. However, speakers can
also modulate social impressions in the listener through their vocal expression (e.g., by
speaking in a confident vs. a doubtful tone of voice). Here, we addressed how both
accents and vocally-expressed confidence affect social outcomes in an interaction
setting using the Trust Game, which operationalizes interpersonal trust using a monetary exchange situation. In a first study, 30 English Canadians interacted with partners
speaking English with a Canadian, Australian, or foreign (French) accent. Speakers
with each accent vocally expressed themselves in different ways (confident, doubtful,
or neutral voice). Results show that trust decisions were significantly modulated by a
speaker’s accent (fewer tokens were given to foreign-accented speakers) and by
vocally-expressed confidence (less tokens were given to doubtful-sounding speakers).
Using the same paradigm, a second study then tested whether manipulating the social
identity of the speaker-listener led to similar trust decisions in participants who spoke
English as a foreign language (EFL; 60 native speakers of French or Spanish). Again,
EFL participants trusted partners who spoke in a doubtful manner and those with a
foreign accent less, regardless of the participants’ linguistic background. Taken together, results suggest that in social-interactive settings, listeners implicitly use different sources of vocal cues to derive social impressions and to guide trust-related
decisions, effects not solely driven by shared group membership. The influence of voice
information on trust decisions was very similar for native and non-native listeners.
... However, there is no evidence that repayment rates among devout Christian female borrowers have changed. The research also explores whether women in harsh Islamic environments provide similar guidance to those in Christian environments (Miller & Stark, 2002;Al-Azzam et al., 2014;Nawai and Shariff, 2012;Baele et al., 2014;Clark et al., 2021;Tan and Vogel, 2008;Shahriar et al., 2020 andGyapong et al., 2021). Based on our analysis, we propose the following hypotheses: ...
Using global data, we find that Islamic microfinance institutions (MFIs) are less likely to experience credit risk when they lend to more organizations, more women, and more agricultural consumers. Consequently, conventional MFIs benefit from a reduction in loans to group borrowers, a reduction in loans to agriculture region customers, and increased focus on women consumers. We present results that demonstrate the possibility of using social dynamics within Muslim communities, adding to the literature on microfinance and financial inclusion. As part of our work, we provide positive information about how to promote women’s and agricultural consumers’ financial inclusion. This information is provided to funders and managers of Islamic MFIs. All of this is achieved without affecting the credit portfolio quality. Our research ultimately shows that social dynamics can be used to promote financial inclusion while preserving the credit portfolio. In conclusion, our research suggests that Islamic MFIs can take advantage of social dynamics to achieve financial inclusion without compromising portfolio quality.
... The examination of how various demographic groups perceive the quality of the services offered exhibits important insights on the differences in customer experiences inside the microfinance organization. In general, male respondents are more likely than female respondents to view aspects of service quality favorably, while other studies did not find significant evidence in support of this [76]. These differences, however, did not reach statistical significance, suggesting that any observed changes could be the result of random variation rather than systematic gender disparities. ...
Microfinance institutions (MFIs) play a vital role in extending financial services to marginalized and underprivileged populations worldwide. While the focus of MFIs has traditionally been on providing financial products, recent research highlights the importance of intangible factors in shaping their success and sustainability. This research examines the influence of factors such as trust, empathy, organizational culture, and reputation on MFI performance. A structured questionnaire was developed, and data were collected from 110 clients. Statistical analysis, including Cronbach alpha, composite reliability, and exploratory factor analysis, was employed to assess the reliability, validity, and dimensionality of the collected data. Three dimensions of service quality were identified: empathy and assurance, trust, and intangibles. While gender differences in perception were observed, they were not statistically significant. However, significant differences were noted across age groups, educational levels, and types of businesses. Understanding and addressing factors related to trust, intangibles, and specific aspects of service satisfaction are crucial for enhancing client engagement and long-term success. By continuously striving to improve service quality, microfinance companies can strengthen client relationships and position themselves in such a way as to achieve sustainable impact and success in the microfinance landscape.
... Confirming the satisfactory loan repayment of women consistent with Roslan [14] and Shahriar, Unda and Alam [16], 81 percent of actual NPLCs were male. Further, 93 percent of actual NPLCs were over 26 years of age. ...
... Shahriar, (2016) studied on recently married women and explored that the women who experienced violence from their husbands did not repay their credit. Again, Shahriar (2020) found that women were more trustworthy than men and whatever the situation, they gave their best effort to repay the credit. Another study examined the impact of ownership of assets on microcredit repayment. ...
This study investigates the status of microcredit repayment due to the COVID-19 crisis in Bangladesh. The study inspects several socioeconomic factors to discover the probability of default and to avoid delinquency regarding repayments rate. This study focuses on 194 respondents from Bangladesh and apply logistic regression model for executing the analysis. It found several influencing variables from the analysis with significant differentiation that has effects on the microcredit repayments rate. From the predictors, household yearly income in the COVID-19 pandemic was the strongest predictor that was reported as an odds ratio of 1.620. Two other independent variables that made statistically unique significant contributions to the model are difficulty of COVID-19 and number of loans taken by the credit holder. Microcredit Regulations Authority (MRA) and the government of Bangladesh need to implement several policies in order to drive the difficulty of the financial crisis as well as to boost up the repayments rate in crisis periods.
... The findings indicated that majority of respondents were males, hence were more prone to COVID -19 infection than females. Chong et al. (2010) Shahriar et al. (2019 revealed that in Malaysia and Pakistan, gender differences influenced loan repayment where females were more likely to repay their loans than males. Concurrently, Muthoni (2016) approved that female SACCOS clients in Kenya had high loan repayment rates. ...
The study assessed the influence of the clients’ demographics and strategies on loan repayment during the Corona Outbreak (COVID-19) in Tanzania. The study used Morogoro and Mvomero Teachers SACCOS (MMTS) as its case. The cross-sectional and explanatory designs, survey strategy and random sampling were applied to selected 98 SACCOS borrowers for the study. IBM SPSS software was used to enter the data and analysis was executed using descriptive and Ordinary Least Square (OLS) techniques. The study unveiled that COVID-19 deteriorated the loan portfolio during the pandemic. The findings further uncovered that the business owners were mostly affected by the pandemic and the majority of the borrowers repaid their loans using alternative sources of income. The regression analysis revealed that the amount of loan borrowed positively and significantly influenced the loan repayment while age, level of education and economic activity negatively and significantly influenced the loan repayment. The study concluded that during the COVID-19 pandemic, the repayment of loans for Tanzanian SACCOS was not conducive because of poor repayment strategies and the influence of clients’ demographic factors. The study recommended policymakers to design policies that would enhance the repayment of loans for SACCOS borrowers during pandemics. The study contributed to the contingency theory by recommending borrowers’ diverse loan repayment strategies during contingency situations.
... It implies that merely adding value to agricultural products, such as converting them into "pito," does not guarantee increased incomes. Additionally, this result contradicts Shahriar, Unda, and Alam's [60] findings in Bangladesh, which indicated that women could repay loans from microfinance institutions (MFIs). These disparities in findings may be attributed to differences in investment choices and the specific contexts of the studies. ...
Poverty, a pervasive and consequential global issue, has garnered significant attention due to its wide-reaching prevalence and profound implications. Various strategies, including microfinance, have been implemented to tackle this pressing concern. One such strategy is the Microfinance and Small Loans Centre (MASLOC) in Ghana, which aims to reduce poverty. However, despite its potential, MASLOC's role in poverty reduction has yet to be thoroughly examined, leading to inconclusive findings, and necessitating this study. A single case study design addressed this research gap and provided valuable insights. A comprehensive dataset was compiled through interviews and observations involving 40 MASLOC beneficiaries and officials. Thematic analysis was utilized to dissect the collected data, revealing noteworthy patterns and trends. The study's outcomes shed light on MASLOC's effectiveness in mitigating poverty. Specifically, it was found that MASLOC played a pivotal role in poverty reduction by bolstering income levels, amplifying consumption patterns, facilitating access to fundamental necessities, and enabling the accumulation of valuable assets. Nevertheless, the analysis also highlighted specific challenges. Issues related to loan repayment and staffing emerged as constraints within the MASLOC framework. In essence, the study established that MASLOC contributes to the overarching goal of poverty reduction. The findings are helpful because fostering a positive attitude towards loan repayment is crucial, and this endeavour should be complemented by the strategic recruitment of competent staff members who can effectively navigate the intricacies of the scheme to ensure the sustainability of MASLOC. What sets this study apart is its innovative exploration of the impact of MASLOC on poverty—a primarily overlooked facet. By delving into this uncharted territory, the study enriches the ongoing discourse surrounding government microfinance schemes' influence on its beneficiaries. This research contributes not only to the academic realm but also to the practical realm, as it offers actionable insights for policymakers in poverty reduction.
... Other studies in the literature have suggested that strategic default may arise as a consequence of health shocks (e.g., accident, fracture, operation, non-communicable disease; see Hossain et al., 2019); support or burden of relatives (Al-Azzam et al., 2020); socioeconomic factors (Abimbola, 2021); poverty (Zainuddin and Yassin, 2019); religion, technological, screening, and monitoring variables (Hill and Sarangi, 2012); innate trustworthiness (Shahriar et al., 2020); member social ties and quality of the group leaders (Al-Azzam et al., 2013); institutional context (Boehe and Cruz, 2013); social capital variables such as geographical proximity, trust, friendship, group homogeneity, and acquaintanceship (Al-Azzam et al., 2020); and exposure to physical or sexual violence among married women (Shahriar, 2016). Most of these studies focus on the overall default determinants, and none of them use survival analysis or hazard decomposition analysis to 3 investigate the association of gender on the time to repay group loans. ...
En este documento se investiga cómo las disparidades de género afectan el tiempo de repago de los microcréditos grupales utilizando técnicas de análisis de supervivencia y de descomposición de la función de riesgo. Además, se controla el efecto que tuvo la pandemia de COVID-19 sobre el tiempo de repago requerido por los acreditados de microcréditos. Se utilizó una muestra grande de microcréditos grupales bancarios de agosto de 2017 a agosto de 2021. A pesar de que la tasa de incumplimiento de las mujeres acreditadas es menor, las estimaciones incondicionales muestran que el incumplimiento de las mujeres acreditadas ocurre antes y es de aproximadamente el equivalente a tres pagos consecutivos. Más importante aún, este resultado persiste cuando se controla por factores micro, industriales y macroeconómicos. También, se observa que la pandemia por COVID-19 se materializó como un pico en las tasas de incumplimiento agregadas que posteriormente se redujo gradualmente. El estudio identificó una brecha de género potencial que ha sido poco estudiada en la literatura.
... Second, in line with the findings of a study of over 700 MFIs (Adegbite & Machethe, 2020), our analysis of the Agrics client database shows that the repayment rate of female farmers is significantly higher than that of male farmers (p < 0.05). Other studies have reported that the higher repayment rate of women is at least partly attributable to their greater trustworthiness (Shahriar et al., 2020) and greater willingness to pay back microloans compared to men. Moreover, because female-headed households-despite their tendency to be low-endowed (Tittonell et al., 2005)-have high repayment rates, they also have an increased capacity to meet their financial obligations (Table 4). ...
The advent of microcredit programmes in sub-Saharan Africa provides opportunities for rural households to acquire agricultural inputs and consumer goods. This study analysed gender differences in investment behaviour and repayment performance using a unique dataset-the complete client database (21,386 clients) of a microcredit programme operating in Western Kenya. Products purchased via the microcredit programme include seeds, fertilisers, post-harvesting technologies (drying sheets, storage bags, and pesticides), chicken feed packages, and different solar panel products. A machine learning-based basket analysis identified combinations of products purchased by male and female clients. Our results showed that female farmers usually made smaller investments, had higher repayment rates, and purchased more post-harvesting technologies than male farmers. In addition, female farmers used their loans to purchase less expensive products, whereas male farmers usually purchased more fertiliser and expensive solar panel products. The basket analysis revealed that female farmers purchased multiple products simultaneously more often than male farmers did. Finally, households without mobile phones had low repayment capabilities. Collectively, our findings show that microcredit programmes serving smallholder farmers can capitalise on their business data to learn about their clients' gendered investment preferences and repayment behaviour.
... This is because WSLG consists of all women, while most PEG members are men. This finding is in line with research by (Dorfleitner & Oswald, 2016;Jumpah et al., 2018;Schurmann & Johnston, 2009;Shahriar et al., 2020). According to Schurmann and Johnston (2009), women are the primary target beneficiaries of the microcredit program in Bangladesh. ...
The Community Empowerment Trust Fund is a revolving fund belonging to the community originating from the former Sub-District Development Program and the National Program for Independent Rural Community Empowerment in Indonesia which ended in 2014. Community institutions then manage the Community Empowerment Trust Fund to fund community economic activities in the form of group loans. The group lending model is a financial inclusion that reaches the poor who do not have collateral. These funds have been managed well with the group loan model. However, the success of managing these funds cannot be separated from the social capital built between group members and between the group and the fund management unit. This study aims to examine the management of the borrower group – group internal setting; group loan appraisal and group loan control – and social capital on repayment performance. The study results prove that group lending appraisal, group lending control, and social capital positively impact repayment capacity. The research finding is social capital strengthens group lending control dynamics to increase repayment capacity. Another finding explains that women’s loan groups have a higher collectability rate in repayment of loans compared to productive economic business groups whose members are both male and female.
... By targeting women, microfinance institutions improve women's empowerment through access to credit. In addition, women are less risky borrowers insofar as female borrowers repay loans more than men (Abdullah & Quayes, 2016;Armendáriz & Morduch, 2010;D'espallier et al., 2013;Hermes & Lensink, 2011;Shahriar et al., 2020). For these two main reasons, social microfinance funders strongly encourage the targeting of women. ...
The main objective of this study is to assess the impact of unobserved heterogeneity on microfinance social efficiency analysis. Based on recent nonparametric techniques and directional distances, we identify a latent heterogeneity factor related to the microfinance institute (MFI) manager’s ability to promote women, independent of MFI size. We test for the significance of this unobserved factor and analyze the impact of MFI social inefficiency measures. Using a cross-country sample of 501 MFIs in 2011 from six main regions of the world, our findings reveal a significant effect of unobserved heterogeneity on the frontier and hence stress the importance of subjective factors in defining the set of production possibilities. We assess the robustness of our findings with the considered profit-oriented status and analyze the link between our unobserved heterogeneity factor and institutional and socioeconomic indicators.
... Additionally, there are many studies on the relationship between borrowers' gender and microcredit performance in developing countries (Berg et al. 2015). They conclude that women are more likely to repay collateral-free microloans than men, irrespective of any control mechanisms such as joint liability or dynamic repayment incentives (Shahriar et al. 2020). Sooryamoorthy (2005) showed that the pattern of credit used by women in the so-called self-help groups is related to their marital status, the difference in this pattern being due to the share of borrowers' responsibilities with their parents or husbands. ...
The subject of this study is the microcredit market in the USA, more specifically in Florida. The justification for choosing this specific state is the massive presence of the Hispanic population. This will facilitate a generalization of the obtained results to the microcredit market in Latin American countries. Thus, the objective of this study is to analyze the profile of microcredit holders and their companies from socioeconomic and financial points of view. As our data also consider the degree of repayment of the microloans included in the sample, the clients’ profile is related to the punctuality or default of their corresponding loan repayments using the methodology of multinomial logit regression. The variables used in this study refer to personal information concerning borrowers (gender, age, education level, and marital status), the economic situation of their respective companies (closeness to the lender, number of workers, and revenues), and the characteristics of granted loans (principal, term, and purpose). However, the results of the regression show that only two variables are significant at the 5% significance level: the borrower’s age, which has a positive effect on repayment punctuality, and the loan term, which exhibits a negative effect. The findings of this study have clear implications, as they can help lenders design suitable microloans adjusted to customer profiles. Finally, future research should include other demographics and characteristics of affected companies.
... This is expected to be amplified when coupled with the religiosity of Islamic MFI clients to induce more compliant behavior and greater commitment to repayment (Al-Azzam et al., 2012;Nawai and Shariff, 2012;Baele et al., 2014;Clark et al., 2021). Religiosity amplifies trustworthiness (Tan and Vogel, 2008), which in turn has a mediating effect on the gender gap in micro loans repayment rates (Shahriar et al., 2020). This would suggest better repayment performance among female borrowers in Islamic MFIs. ...
Using international data, we find that Islamic MFIs experience reduced credit risk by offering more groups loans, serving more women, and serving more borrowers in rural locations. Conventional MFIs benefit from fewer group loans, less loans to rural borrowers, and a greater focus on female borrowers. Our results contribute to microfinance and financial inclusion literature by highlighting the potential of tapping into the social dynamics within Muslim communities. We present encouraging insights for Islamic MFIs donors and managers on the possibility of promoting the financial inclusion of women and rural borrowers without compromising the quality of the credit portfolio.
... Some scholars (Shahriar et al., 2020;Blanco-Oliver et al., 2021) examine the impact of borrowers' gender on delinquency (repayment) rates. According to the classic microcredit literature, for instance, the very fact that such credit targets mostly women contributes, at least partially, to explaining the success of these programs in developing countries. ...
Crowdfunded microloans are a suitable tool for financing basic economic activities in developing as well as developed countries, favouring female empowerment. Despite the loans being relatively small, the widespread use of this instrument merits analyzing the factors affecting the microloan. One of these factors is gender because microloans are an important tool to finance projects promoted by women in many developing countries where microfinance is widely diffused. This research aims to determine if the gender of crowdfunded micro-borrowers is related to the main features which define the conditions of a microloan: amount, term, number of lenders, length of time to contact with borrowers and repayment system. The methodology used is the multinomial logit regression. The sample used in this study has been obtained by applying sampling techniques to a extensive public database from Kiva. This provided information on microloans from 56 countries around the world. The results based on amount, term, repayment method and recruitment period indicate that women are the best borrowers. All these variables, except the term, are significant at a 5% level. These findings may be useful to improve financial inclusion and outreach, consistently with the Sustainable Development Goals. Future research is needed to assess how “green and pink” microfinance (with environmental strategies particularly favored by women) can attract more ESG-compliant crowdfunding resources.
... Some have sought to understand the differences between these two populations. Although research has called for understanding the lived experiences of those who identify as transgender (Nagoshi and Brzury, 2010), gender differences extend beyond being a man or a woman (Yadav and Unni, 2016;Shahriar et al., 2020). ...
... For instance the literature suggest that women outperform men in paying back their loans, and that this can lead to financial stability in general [47]. Previous studies regarding integrity show that women were more likely to pay back their loans than men; they are also more trustworthy than men who are more likely to repay their loans irrespective of any control mechanisms [48]. A global analysis of micro-credit financial institutions has shown that women are also more likely to pay their debts than men are [49]. ...
Women living in coastal areas around the Davao Gulf mainly participate as gleaners, fishers, traders, fish farmers, and fish processors in the small-scale fisheries (SSF). However, there is little information about their participation in the management of their fisheries resources. They remain invisible considering their contributions to policy implementations, including during the closed fishing season. Thus, this study aimed to describe the roles of women, their access to community services, and their support for the implementation of the closed fishing season in Davao Gulf, Philippines. Survey data on women respondents (N = 255) were collected in six sites, collecting information on their involvement in fishing and fishery-related activities. The information was validated through seven focus groups (N = 112). Results showed that respondents live near the shore, poorly educated or attended elementary level, and are members of fishing families. They engaged in gleaning and have access to loans through microfinance institutions to address food security concerns, their children's education, and other household needs. Women also strongly supported the implementation of the closed fishing season, mainly through awareness and education campaigns during meetings. However, most of the respondents failed to connect to fishing organizations as these were male-dominated, and very few community organizations engaged women. Hence, women were underrepresented, and their opinions were undervalued in the management programs in Davao Gulf. To improve the situation, future training and livelihood programs in the fisheries should actively engage women and make all efforts to be more inclusive in community programs or projects.
... They are also thought to be more cooperative than men, even in studies regarding microcredit borrowing (Anthony and Horne, 2003). Other studies have shown that women have higher integrity to pay back their loans compared to men; they are more trustworthy than men, and that they are more likely to repay their loans irrespective of any control mechanisms (Shahriar et al., 2019). A global analysis on micro-credit nancial institutions has shown that women are also more likely to pay their debts than men are (D 'Espallier et al., 2011). ...
Women’s role and support for the fisheries are barely acknowledged, they are stereotyped and marginalized and given limited participation in the fisheries. This study aims to describe the role of women and investigate their support for the closed fishing season in the small-scale fisheries (SSF) of Davao Gulf, Philippines. Survey data were collected in six study sites, only surveying women respondents involved in fishing and fishery-related activities. Interviews were conducted from November 2019 to July 2020 with respondents from Governor Generoso, Lupon, Davao City, Sta. Maria, Malita, and Don Marcelino (N = 255). The information collected was validated through seven focus groups with a total number of participants, N = 112. Results showed that women respondents who live near the shore, were poorly educated, attended elementary level (38%), do not own any parcel of land (91%), but have access to microfinance credit (64%). Women participated in the fisheries by gleaning for food and income. Some of their activities were performed to support their husbands, including preparing fishing gears (23%), food processing (6%), collecting and sorting fishery products (10%), marketing fish catches (25%), and gleaning (21%). Other results showed that women strongly support the closed fishing season which was significantly influenced by fisheries-related variables e.g. proportion of catch sold, and belonging to a family of fishers [B = 0.459 (S.E.=0.188), Wald = 5.928 df = 1, p = .015]. They support the policy for sustainability of their husband’s catches and their livelihood. Women also mentioned the need for financial seed capital for fishing gears, fishing operation and rented stalls for selling of fish.
... Microcredit can contribute to reducing gender inequalities by helping women to become financially independent (Zhang and Posso, 2017). Using experimental evidence from Bangladesh, Shahriar et al. (2020) show that women are more likely to repay collateral-free microloans, and that this is related to innate trustworthiness. Agier and Szafarz (2013), however, highlight a 'glass ceiling' effect on the size of microloans found in Brazilian data. ...
... Por último, [42] Demuestran que las mujeres son más confiables que los hombres a la hora de adquirir créditos, ellas ofrecen más garantías para devolver sus préstamos independientemente del mecanismo al que hayan accedido. [43] examinan la relación entre el riesgo crediticio y la diversificación geográfica en las microfinanzas, para así entender de que existe una relación positiva significativa entre el riesgo geográfico y el riesgo de pérdidas. ...
Resumen Las estrategias de recuperación en las microfinanzas no son las más acertadas. Algunas de las respuestas a estos desaciertos son los riesgos sociales. El tema se ha investigado por más de 25 años dejando muchos interrogantes hasta la actualidad. El objetivo de este artículo es presentar una revisión bibliométrica y sistemática de los Riesgos en las Microfinanzas, con plataformas como Bibliometrix y Gephi. Se hicieron consultas en bases de datos como WoS y Scopus, que permitieron una clasificación de documentos en tres categorías según su trascendencia; clásicos, estructurales y recientes; adicional, se realiza un análisis de cocitaciones mostrando resultados en cuatro diferentes enfoques: Instituciones, Prevencion de VIH/SIDA, Crédito y Desarrollo de Género. Concluyendo el incumplimiento de los propósitos microfinancieros. Palabras clave: riesgo, microcrédito, préstamo, pobreza. Abstract Recovery strategies in microfinance are not the most successful. Some of the responses to these failures are social risks.
... A very recent study conducted in Bangladesh [35] considers that growing evidence suggests that women are more likely to repay collateral-free microloans than men. They find that women are more trustworthy than men and that they are more likely to repay their loans, irrespectively of any control mechanisms, such as joint liability or dynamic repayment incentives. ...
Research on microfinance institutions (MFIs) has normally been focused on developing and emerging markets. However, an analysis of developed countries is also important for foreign MFIs wishing to take advantage of the growth potential of those markets. Therefore, the aim of this article is to determine whether MFIs working in the USA’s market should change or adapt their microcredit policies with respect to women. In effect, there are no studies in the USA supporting the argument that women are a better risk of microcredit than men, or that there are differences in microcredit repayment behavior between women and men. Additionally, it was investigated if the payment behavior of women and men is related to variables such as their age, ethnicity, academic level, marital status, or the characteristics of the microcredits, like purposes, amounts, and payment terms. In the USA, there are not—as in other countries—strong incentives, motivations, or external pressures, other than those that men also have, which influence women to pay their microloans better than men. Then, domestic and international MFIs attracted to enter the USA’s market should review their microcredit policies in relation to women. More research is needed about the microfinance market in the USA.
Microfinance institutions (MFIs) have been criticized for charging high interest rates on loans. Building on multiple-principal agency theory, we argue that when an MFI acquires proprietary information about its clients through monitoring, it gains an information advantage over other lenders enabling it to extract rents by charging higher interest rates. Using data from 712 MFIs across 62 countries from 2010 to 2018, we find this to be the case. Furthermore, we find that MFIs that make more relationship-based loans, operate in less competitive markets, and those driven by for-profit commercial banking logic are more likely to extract even greater rents.
The study analyses the relevance of climate risk on bank stability when there exists a gender gap in financial inclusion. The findings reveal that in countries with higher adaptive capacity, lower gender gap in account ownership exerts a positive impact on bank stability. In case of use, the impact is manifest more strongly in case of savings as compared with borrowings.
L’objet de cet article est de connaître les principaux déterminants de la massification de l’offre de crédits destinée aux femmes des pays de l’Union économique et monétaire ouest-africaine (UEMOA). Dans cette perspective, notre analyse empirique a porté sur des institutions de microfinance (IMF) des 8 pays membres de l'UEMOA sur la période 2002-2017. Les résultats du modèle de panel à effet aléatoire mettent en évidence que les fonds propres ainsi que les subventions reçues par les IMF contribuent à accroître le volume de crédits destiné aux femmes, contrairement aux financements par endettement qui apparaissent sans incidence. De plus, les pays de l’UEMOA gagneraient à revoir leur système de gouvernance, celui-ci ne semblant pas propice à un accroissement de l’offre de crédit destinée aux femmes. Classification JEL : G1
This study investigates the perceived and actual trustworthiness of female managers when using rhetoric to advertise their trustworthiness in public disclosure documents. We find that the stock market reacts more favorably to trust rhetoric if the document has been prepared under the responsibility of a female CEO rather than a male CEO. We rule out that this result could be driven by female and male CEOs talking about trust in different contexts. However, inconsistently with the notion that the trust rhetoric of women managers is more truthful than that of their male counterparts, trust rhetoric does not relate to less extensive earnings manipulation if such rhetoric stems from female CEOs compared to male CEOs. Our results thus do not confirm the popular view that higher female trustworthiness explains gender differences in accounting behavior.
This study investigates whether and how family social capital influences borrowers' loan performance in informal financial markets. Using a unique dataset collected from an informal financial institution in Eastern China from 2014 to 2018, we show that a higher level of family social capital is associated with better loan performance, captured by lower default probability, lower loss ratio, and lower loss amount. The effect is more pronounced for borrowers with less access to formal financial markets and those with poorer financial conditions, while it is less pronounced for borrowers with higher risk preferences and those born in regions with high social trust. These results continue to hold after addressing endogeneity concerns and conducting a series of robustness tests. Overall, our study provides evidence that borrowers' family social capital creates value in the informal financial markets.
Experiments complement other methods in identifying causal relationships and measuring behavioral deviations from theoretical predictions. While the experimental method has long been central in many scientific disciplines, it was almost nonexistent in finance until the 1980s. To survey the development of experiments in finance, we compiled a comprehensive account of experimental studies published in the Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Review of Finance, Journal of Quantitative and Financial Analysis, and Journal of Banking and Finance, and experimental finance studies published in the top 5 journals in economics. With this novel dataset, we identified historical trends in experimental finance. Since the first experiments were published in finance journals in the 1980s, especially in the last 20 years, the share of experimental publications in these journals has markedly increased. In this article, we report trends toward descriptive, individual decision, and field experiments.
We explore whether loan officer gender affects loan repayment performance in Cameroonian microfinance institutions (MFIs). After controlling for demand‐side factors (borrower characteristics), lending methodology, loan contract terms, year, and industry fixed effects, we apply a pooled probit model to a unique loan‐level dataset including more than 7000 loans approved between 2007 and 2012 by two Cameroonian commercial MFIs. We find that loans granted and monitored by male loan officers perform better than those granted by female officers and that loans approved under joint liability contracts and monitored by male loan officers are less likely to fall into arrears. Our findings also show that the performance advantage of male loan officers over female officers is confirmed only during bad times. Compared to female loan officers, male loan officers seem to intensify their monitoring efforts during a crisis period. The results are robust after controlling for selection bias and are less sensitive to a change in the loan repayment performance measurement.
We study the role of delegated monitoring in crowdfunded microfinance. We use data from Kiva, a crowdfunding platform, where crowds lend to borrowers through microfinance institutions (MFIs) instead of lending directly. These MFIs monitor debt contracts on behalf of crowds. We find that borrowers who are more intensely monitored by MFIs are more likely to repay crowdfunded loans on time. Monitoring is particularly important in reducing repayment problems of individual loans rather than group-based loans. Monitoring has a stronger impact in less competitive lending markets. We also find that when lending to borrowers, crowds are attentive to the loan-administering MFI's ability to monitor loans.
This paper uses India's microfinance crisis as a context for evaluating alternative theories of microfinance. By contrasting Bangladesh's highly successful Grameen model with the allegedly "universalizable" version of India's SKS Microfinance (that precipitated the crisis), we isolate trust or social capital-not just narrowly interpreted within standard economic theory, but more broadly construed-as the essential element accounting for the early success of microfinance. We show that the microfinance experience has been widely misinterpreted, both in analytical and policy terms. Our analysis suggests inherent limits in extending the model to for-profit institutions and to the pace of scaling-up.
This article grapples with the causes of India’s microfinance crisis. By contrasting Bangladesh’s highly successful Grameen model with the allegedly “universalizable” version of India’s SKS Microfinance (which precipitated the crisis), trust or social capital is isolated—not just narrowly interpreted within standard economic theory, but more broadly construed—as the essential element accounting for the early success of microfinance. It is argued that the microfinance experience has been widely misinterpreted, in both analytical and policy terms. This article suggests inherent limits in extending the model to for-profit institutions and, in particular, to the pace of scaling up.
This article evaluates theories of the origins of sex differences in human behavior. It reviews the cross-cultural evidence on the behavior of women and men in nonindustrial societies, especially the activities that contribute to the sex-typed division of labor and patriarchy. To explain the cross-cultural findings, the authors consider social constructionism, evolutionary psychology, and their own biosocial theory. Supporting the biosocial analysis, sex differences derive from the interaction between the physical specialization of the sexes, especially female reproductive capacity, and the economic and social structural aspects of societies. This biosocial approach treats the psychological attributes of women and men as emergent given the evolved characteristics of the sexes, their developmental experiences, and their situated activity in society.
In this article, we attempt to distinguish between the properties of moderator and mediator variables at a number of levels. First, we seek to make theorists and researchers aware of the importance of not using the terms moderator and mediator interchangeably by carefully elaborating, both conceptually and strategically, the many ways in which moderators and mediators differ. We then go beyond this largely pedagogical function and delineate the conceptual and strategic implications of making use of such distinctions with regard to a wide range of phenomena, including control and stress, attitudes, and personality traits. We also provide a specific compendium of analytic procedures appropriate for making the most effective use of the moderator and mediator distinction, both separately and in terms of a broader causal system that includes both moderators and mediators. (46 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
We analyze partner selection decisions in the formation of borrowing groups in joint liability-based microcredit. We do so within the context of a framed field experiment with the owners of small businesses in rural Bangladesh. We find that when, irrespective of their project status, borrowers are required to make joint liability payments, risky borrowers will offer side payments that are sufficiently large to attract safe borrowers, leading to the formation of heterogeneous risk-matched groups. We discuss the implications of heterogeneous risk matching for the survival and success of small enterprises, and their financiers, in countries with a weak institutional environment.
This paper examines how availability of microfinance influences households’ borrowing from informal sources in village economies. It uses a unique household level panel data set, which spans more than two decades (1987-2008), from rural Bangladesh. We find that households’ access to microfinance reduces the incidence of borrowing from informal sources, but not the amount of borrowing. We find that less poor households benefit more in terms of reducing their reliance on informal borrowing and that the benefit accrues over time. We also find that having access to microfinance increases women’s informal borrowing for small consumption usage, without facilitating access to new business opportunities.
This paper investigates the relations between female leadership, firm performance, and corporate governance in a global panel of 329 Microfinance Institutions (MFIs) in 73 countries covering the years 1998–2008. The microfinance industry is particularly suited for studying the impact of female leadership on governance and performance because of its mission orientation, its entrepreneurial nature, diverse institutional conditions, and high percentage of female leaders. We find female leadership to be significantly associated with larger boards, younger firms, a non-commercial legal status, and more female clientele. Furthermore, we find that a female chief executive officer and a female chairman of the board are positively related to MFI performance, but this result is not driven by improved governance.
We explore how new types of hybrid organizations (organizations that combine institutional logics in unprecedented ways) can develop and maintain their hybrid nature in the absence of a "ready-to-wear" model for handling the tensions between the logics they combine. The results of our comparative study of two pioneering commercial microfinance organizations suggest that to be sustainable, new types of hybrid organizations need to create a common organizational identity that strikes a balance between the logics they combine. Our evidence further suggests that the crucial early levers for developing such an organizational identity among organization members are hiring and socialization policies.
We study the cultural foundations of management practices, which are increasingly recognized as important determinants of firm performance. This research closes the loop on two developing literatures, one seeking cultural explanations for economic development and the other seeking to account for differences in firm performance from differences in how firms are managed. Theoretically, we expect individualist culture to improve management practices because it formalizes the labor relation. Results show that higher individualism is strongly associated with more sophisticated management practices. Several robustness checks confirm our findings. In a direct test, culture is a much more important determinant of management practices than are key formal institutions. Moreover, a formal test shows that management practices are indeed an important mediator in the empirical link between culture and per-capita income. The evidence presented in this paper moves us forward in opening up the black box of culture-performance linkages, helping us to understand better the channels through which culture can affect economic prosperity.
The authors review and critique the conduct and reporting of mediation analyses in 409 studies published in five leading organization studies journals over the past 25 years. The aim of the study is to learn from past practice and to use that knowledge to signal to researchers the importance of correctly applying mediation tests as well as to facilitate the valid testing of mediation models and the reporting of mediation results in future studies. The authors content code their sample for a wide range of characteristics and find that the majority of inferences of full and partial mediation are based on testing procedures that deviate significantly from procedures recommended by statisticians. In addition, the reporting of results is often incomplete and inefficient. The authors discuss and evaluate the findings of the study and make recommendations for future testing and reporting of results for mediation models.
Assessing Singletons
The one-child policy introduced by the government of China in 1979 increased the proportion of urban families with an only child; later referred to as "little emperors" in media reports. In 2010, Cameron et al. (p. 953 , published online 10 January) recruited approximately 400 residents of Beijing who had been born either before the implementation of the policy (1975 and 1978) or after (1980 and 1983). Using economic games to measure trust, risk, and willingness to compete, they found that the post-1979 cohorts were less trusting and less willing to compete and also more risk averse.
Examines how achieved and attributed characteristicsof entrepreneurs affect the composition of founding teams, and how thesecharacteristics are affected by the social context of the entrepreneurialenterprise. Limitations of previous studies are identified: their lack ofgeneralizable findings and their "success bias." To avoid theselimitations, the present study tracks entrepreneurs from the first steps atfirm founding. To avoid success bias a methodological innovation that considersall possible combinations of group members (not just those in a given sample)is used. Structural event analysis is used to generate possible teams, and tocompare chance expectations with empirical teams. The sociological literature identified five mechanisms of group composition:homophily, functionality, status expectations, network constraint, andecological constraint. Sample was 816 teams drawn from the Panel Study ofEntrepreneurial Dynamics (PSED) compiled between 1998 and 2000. Analyzed werethe compositional properties of organizational founding teams. Found thathomophily (respecting both attributed and achieved characteristics) stronglyinfluences group composition. Found that influence of "strong" ties(romantic or family relations) was pronounced; but "weak" ties (such asbusiness acquaintances) imposed no significant network constraint. Ecologicalconstraint leads to disproportionate isolation of minorities such as women andblue-collar workers, but segregation by industry does not strongly affect teamhomophily.(TNM)
Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explorethe patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs - a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.
Here is the reference for this chapter.
MacKinnon, D. P., Cheong, J., Pirlott, A. G. (2012) In Cooper, H., Camic, P. M., Long, D. L., Panter, A. T., Rindskopf, D., Sher, K. J. (Eds.) (2012). APA handbook of research methods in psychology, Vol 2: Research designs: Quantitative, qualitative, neuropsychological, and biological., (pp. 313-331). Washington, DC, US: American Psychological Association.
Domestic violence is the most prevalent form of gender-based violence that threatens the wellbeing and dignity of women. In this paper, we examine whether and how exposure to physical or sexual assault by male partners influences women's decision to initiate a new business when they have access to financing. We collected primary data from rural Bangladesh in collaboration with a microfinance institution that provided small collateral-free loans to a group of married women. We conducted a baseline survey before loan disbursement and then conducted a follow-up survey 12 to 15 months later to collect information on loan usage. We find that women who experienced physical or sexual violence by their husband before receiving a loan are less likely to initiate a new business with their loan than those who did not experience such violence. Exposure to domestic violence obstructs the initiation of new businesses through reduced entrepreneurial self-efficacy and increased fear of business failure. The adverse impact of domestic violence is more detrimental for women who recently experienced another potentially traumatic event—an environmental disaster—than for those without such an experience.
This paper has three overarching objectives. The first is to document the development of the body of work known as women's entrepreneurship research. The second is to assess the contributions of this work, specifically vis-à-vis the broader entrepreneurship literature. The third is to discuss how this broader literature poses challenges (both difficulties as well as opportunities) for scholarship on female entrepreneurs. We approach these objectives from the standpoint of informed pluralism, seeking to explore whether and how women's entrepreneurship research offers extensions to—and can be extended by—general research on entrepreneurs and their ventures.
Prior research suggests that long-term relationships with microfinance institutions (MFIs) are necessary for sustained growth of microcredit-initiated small businesses. However, we present robust evidence that long-term lending relationships may worsen the credit risk of MFIs. Based on information on 1087 MFIs from 69 countries over the period of 2003–2014, we show that, at the initial stage, credit risk declines as an MFI makes more relationship-based loans, but after a certain level, default and delinquencies increase with the magnitude of relationships. We further show that the non-linear, U-shaped, association between relationship lending and credit risk is stronger (a) among small MFIs compared to that among large MFIs and (b) among MFIs that make individual loans compared to those making joint liability-based loans. We discuss policy implications of these findings.
Examines the hypothesis that the fertility effect of parental preference for sex of offspring will be more pronounced in a population in which contraceptive prevalence is high than in a comparable population where it is low. The hypothesis is tested in Matlab, in a rural area of Bangladesh, a country where preference for sons is strong. -Authors
This article examines whether the profit orientation of a microfinance institution (MFI) affects its decision to extend loans to business start-ups. Based on information from 198 MFIs in 65 countries, we show that for-profit MFIs are less likely to provide financial capital to business start-ups than their not-for-profit counterparts. This results from the adoption of a dominant ‘commercial’ logic by for-profit MFIs, which motivates them to maximize profit by extending loans to less risky ventures with mature projects. In contrast, a dominant ‘development’ logic motivates not-for-profit MFIs to alleviate poverty through supporting the creation of new ventures. The use of a propensity score matching technique to correct for any potential endogeneity problem provides us with greater confidence that the suggested association is not a spurious correlation.
Using data on 935 small firms and bank managers, we differentiated customers' relational trust in their banks from beliefs about the banks' self-interested motivations. Relational trust mediated the relationship between bank strategies (customer orientation and manager continuity) and the likelihood a firm would switch banks, and the effect of trust went beyond that of beliefs about self-interest. Further, customer orientation reduced bank switching through relational trust, whereas manager continuity operated on switching both directly and through relational trust.
Control in emerging organizations is becoming increasingly problematic due to the need for increasing employee discretion of behavior stemming from greater uncertainty of how to accomplish tasks. Traditional control processes, based on the use of rules and supervision, are largely ineffective for effectively controlling behavior where there is uncertainty and ambiguity about how to successfully carry out tasks. This problem is approached here from an information processing perspective. Our contention is that effective control of tasks, that is, assuring goal attainment, is the result of linking the information processing (IP) requirements of tasks with information processing capabilities of three control strategies: objective controls, normative controls and self-management. A set of propositions are proposed suggesting that as IP requirements increase, there is greater reliance on normative and self-management control strategies for effective task completion. However, these high IP capability strategies will be effective only to the extent that the opportunity for control loss inherent in these strategies is reduced through investments in bonding and trust. © 1996 JAI Press Inc. All rights of reproduction in any form reserved.
Social scientists are often interested in testing multiple causal mechanisms through which a treatment affects outcomes. A predominant approach has been to use linear structural equation models and examine the statistical significance of the corresponding path coefficients. However, this approach implicitly assumes that the multiple mechanisms are causally independent of one another. In this article, we consider a set of alternative assumptions that are sufficient to identify the average causal mediation effects when multiple, causally related mediators exist. We develop a new sensitivity analysis for examining the robustness of empirical findings to the potential violation of a key identification assumption. We apply the proposed methods to three political psychology experiments, which examine alternative causal pathways between media framing and public opinion. Our analysis reveals that the validity of original conclusions is highly reliant on the assumed independence of alternative causal mechanisms, highlighting the importance of proposed sensitivity analysis. All of the proposed methods can be implemented via an open source R package, mediation.
This paper investigates how social identification influences investment decisions of retail investors. We collected survey data from clients of two banks that exclusively offer socially responsible investment (SRI) products and savings accounts. The majority of the clients of these banks also use investment services from conventional banks. We find that investors who identify themselves more with socially responsible investment products invest substantially more at socially responsible banks. Expectations about return and risk of socially responsible investments have a much smaller effect on the allocation to socially responsible banks. Moreover, financial motivations are more important for investors with weaker social identification. These investors are more likely to restrict their socially responsible investments to products that offer tax benefits.
We study whether natural disasters affect risk-taking behavior exploiting geographic variation in exposure to natural disasters. We conduct standard risk games (using real money) with randomly selected individuals in Indonesia and find that individuals who recently suffered a flood or earthquake exhibit more risk aversion than individuals living in otherwise like villages. The impact persists for several years, particularly if the disaster was severe. Some, but not all, of this effect is due to income losses. While we cannot rule out fundamental changes in risk preferences, data on subjective beliefs of the probability of a disaster occurring and the expected severity of such a disaster suggest that changes in perceptions of background risk are driving the more risk-averse behavior we observe. We show that access to insurance can partly offset this effect. Finally, we relate the observed experimental behavior to the propensity of respondents to take risks in their daily lives and show that an increase in risk-aversion has important implications for economic development.
By using stochastic frontier analysis, this article examines the technical efficiency of different types of microfinance institutions in Latin America. In particular, it tests whether differences in technical efficiency, both intra- and interfirm, can be explained by differences in ownership. With a focus on non-governmental organizations, cooperatives and credit unions, non-bank financial intermediaries, and banks, the data set contains 1681 observations from a panel of 315 institutions operating in 18 Latin American countries. The results show that non-governmental organizations and cooperatives have much lower interfirm and intrafirm technical efficiencies than non-bank financial intermediaries and banks, which indicates the importance of ownership type for technical efficiency.
Gender differences in religiosity are well known. Past studies have consistently shown that females
tend to be more religious than males. We propose that gender differences in risk preferences are related to
differences in religiosity. Building on the classic concept of "Pascal's wager," we conceive of religious behavior
as risk averse and nonreligious behavior as risk taking. Analysis of data from the Monitoring the Future
data set shows that the addition of risk preference strongly attenuates gender differences in religiosity.
Risk preference also is a significant predictor of religiosity within each gender. Implications of this study
are discussed.
Research on microfinance is now two decades old. There has been enormous progress in understanding both what it does and why. However a lot of we have learnt has raised new and often quite fundamental questions about the nature of microfinance: Is it primarily about investment, consumption or savings? Why dont the investments financed by microcredit lead to income growth and what this has to do with the structure of microlending? What is the role of social capital, reputation and group lending? And many others. This paper is an attempt to take stock of this important body of work and to try to identify the most important questions for future research. Expected final online publication date for the Annual Review of Economics Volume 5 is August 2, 2013. Please see http://www.annualreviews.org/catalog/pubdates.aspx for revised estimates.
Using data from a survey of 160 urban borrowing groups of the Microfund for Women in Jordan, we investigate the effect of screening, peer monitoring, group pressure, and social ties on borrowing groups' repayment behavior as an indirect test of different theoretical models. The dependent variable used captures the intensity of default measured by the total number of days of late repayment after each due date, allowing us to use count data models with cluster standard errors. As theory predicts, our empirical analysis suggests that peer monitoring, group pressure, and social ties reduce delinquency. The paper uncovers interesting evidence about the role of social ties and religion. Most notably, in an area where religion contributes to attitudes and beliefs of individuals, we find that religiosity improves repayment performance.
A considerable amount of research has examined trust since our 1995 publication. We revisit some of the critical issues that we addressed and provide clarifications and extensions of the topics of levels of analysis, time, control systems, reciprocity, and measurement. We also recognize recent research in new areas of trust, such as affect, emotion, violation and repair, distrust, international and cross-cultural issues, and context-specific models, and we identify promising avenues for future research.
This paper analyzes the effect of natural disasters such as volcanic eruptions on the demand and approval of microfinance loans using data from Banco ProCredit Ecuador. We find that high volcanic activity leads to a significantly higher demand for credit while, at the same time, the probability to receive a loan decreases. Yet, this result holds only for new credit applicants whereas returning clients are equally likely to be approved for loans after volcanic eruptions occurred. The findings suggest that microcredit can have an insurance function, yet only if the relationship with the bank has already been established.
This research explores the effect of gender on organizational performance. Data used in the analysis was collected from small businesses in South Central Indiana from 1985-1987. The businesses were from the food and drink, computer sales and software, and health industries. Of the businesses surveyed, 312 were headed by men while 99 where headed by women. On average, these individuals were 44-45 years of age. Organizational performance is examined through two different concepts, survival and success. The results indicate that women were not more likely to go out of business than men, and only prior self-employment had different effects for men and women. Further, there was not a difference in this area among the differing industries. The results also indicate that both genders were equally confident and believed they had the ability to influence business outcomes. As for the success of these businesses, there again was no difference between the males and females with respect to earnings growth. These results are contrary to the traditional thinking that men have an advantage over women with respect to entrepreneurship and organizational performance. Since the dataset used in this analysis was limited in scope, further research is necessary to determine if these results will hold true across other industries. (SRD)
This paper analyzes the effect of unpredictable aggregate shocks on loan demand and access to credit by combining client-level information from an Ecuadorian microfinance institution with geophysical data on natural disasters, more specifically volcanic eruptions. The results of this 'natural experiment' show that while credit demand increases due to volcanic activity, access to credit is restricted. Yet, we also find that bank-borrower relationships can lower these lending restrictions and that clients who are known to the institution are about equally likely to be approved for loans after volcanic eruptions occurred.
Because of conflicting incentives among participants, collaborations (e.g., strategic alliances, joint ventures, and work teams) present a significant control challenge to managerial accountants. On the one hand, formal controls such as sanctioning and monitoring systems improve cooperation by reducing the incentives for opportunistic behavior. On the other hand, prior research finds that the mere presence of a control system causes decision makers to view the collaborative setting as non-cooperative, and other collaborators as untrustworthy. In this paper, we conduct two experiments in which participants act as business collaborators. Through these experiments, we examine the effects of control on trust and cooperation in collaborative settings. Specifically, we posit and provide evidence that a strong control system can enhance the level of trust among collaborators. The mediating role of control-induced cooperation provides the mechanism by which control systems can increase trust in collaborative environments. Furthermore, we show that this increased trust has a positive effect on the subsequent level of cooperation among collaborators. Taken together, the results suggest an increasing marginal benefit of control system strength arising from the trust that control-induced cooperation engenders. The implication is that firms will choose to implement a stronger control system than previous research would seem to suggest.
Does social capital matter to economic decision-making? We address this broad question through an artefactual group lending experiment carried out in five countries: India, Kenya, Guatemala, Armenia, and the Philippines, obtaining data on 10,673 contribution decisions from 1,554 subjects in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and borrowing group self-selection. Results show that societal trust positively and significantly influences group loan contribution rates, that group lending appears to create as well as harness social capital, and that peer monitoring can have perverse as well as beneficial effects. Copyright 2010 Oxford University Press 2010 All rights reserved, Oxford University Press.
Creditworthiness and trustworthiness are almost synonyms because, under asymmetric information, the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness/trustworthiness nexus in an investment game experiment on a sample of participants/non-participants in a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. The first- and second-order beliefs of trustees are also consistent with this picture. Our findings then show that MF participants appear more trustworthy and this may help microfinance to work. A related consequence is that, if (and only if) borrower's trustworthiness is not public information, the mere loan provision acts as a reputation enhancing signal increasing the borrower's attractiveness as a business partner. In such case we have a channel through which a private financial intermediary contributes to the provision of a public good like information, thereby reducing the adverse consequences of market failures on the creation of economic value.