Knut Wicksell Working Paper Series,
Lund University, Knut Wicksell Centre for Financial Studies

Abstract: We apply a panel of 331 microfinance institutions from 37 countries to investigate the relationship between social beliefs and microfinance financial performance. We find that microfinance institutions in countries with higher levels of trust and more collectivist culture have lower operating and default costs and charge lower interest rates. These results provide the first large cross-country evidence that social beliefs are important determinants of microfinance performance.

Keywords: microfinance; performance; informal institutions; trust; collectivism

JEL-codes: G21; O16; O17; O43; O50

47 pages, September 30, 2014

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