Religiosity, Borrower Gender and Loan Losses in Microfinance Institutions: A Global Evidence

Ernest Gyapong* (Corresponding Author), Daniel Gyimah, Ammad Ahmed

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the impact of religious beliefs on loan repayments in 770 microfinance institutions (MFIs) across 65 countries over the period 2006–2018. We find robust evidence of a negative relationship between religiosity and loan losses in MFIs. We also find that the relationship between religiosity and loan losses is stronger for MFIs in Protestant-dominated countries than in Catholic-dominated countries. Moreover, religiosity improves the operational selfsufficiency of MFIs through a reduction in loan losses. We find that religiosity does not improve the loan repayment behaviour of women borrowers, but it reduces the loan size per borrower. Overall, our evidence suggests that although religiosity reduces loan losses through religiosity-induced lender- risk aversion, it does not improve the loan repayment behaviour of borrowers. We also use several approaches to evaluate our results to the effects of endogeneity.
Original languageEnglish
Number of pages36
JournalReview of Quantitative Finance and Accounting
Early online date18 Feb 2021
DOIs
Publication statusE-pub ahead of print - 18 Feb 2021

Keywords

  • microfinance institutions
  • religiosity
  • loan losses
  • operational self-sufficiency
  • cross-country panel data

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