The Effect of Religion on Development Efforts – Evidence from the Microfinance Industry and a Research Agenda

41 Pages Posted: 24 Jan 2017

See all articles by Roy Mersland

Roy Mersland

University of Agder

Bert D'Espallier

Catholic University of Louvain (UCL) - Lessius University College; Hogeschool-Universiteit Brussel (HUBrussel)

Magne Supphellen

Norwegian School of Economics (NHH)

Date Written: 2013

Abstract

This study responds to the need for more empirical knowledge pertaining to the effect of religion on development efforts. We find that Christian Microfinance Institutions (MFIs) have significantly lower funding costs and consistently underperform in terms of financial profit indicators. Contrary to our hypotheses Christian MFIs are as efficient in assuring loan repayment and their average loan sizes are on par with those of their secular peers. When splitting the Christian MFIs into Catholic and Protestant subgroups, we find that the lower financial performance for Catholic MFIs seems to be driven by the lower interest rates that are charged on outstanding loan portfolios whereas the lower financial performance of Protestant MFIs is a result of higher operating costs. In addition, the study provides a new agenda for research pertaining to the effects of religion on development efforts.

Keywords: Religion, performance, efficiency, microfinance, development providers, MFIs

Suggested Citation

Mersland, Roy and D'Espallier, Bert and D'Espallier, Bert and Supphellen, Magne, The Effect of Religion on Development Efforts – Evidence from the Microfinance Industry and a Research Agenda (2013). World Development, Vol. 41, No. 1, pp. 145-156., Available at SSRN: https://ssrn.com/abstract=2356831

Roy Mersland (Contact Author)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

HOME PAGE: http://www.uia.no/microfinance

Bert D'Espallier

Catholic University of Louvain (UCL) - Lessius University College ( email )

Department of Business Studies
Korte Nieuwstraat 33
Antwerp, 2000
Belgium

Hogeschool-Universiteit Brussel (HUBrussel) ( email )

Stormstraat 2
Brussels, 1000
Belgium

Magne Supphellen

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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