The Effect of Religion on Development Efforts – Evidence from the Microfinance Industry and a Research Agenda
41 Pages Posted: 24 Jan 2017
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
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