IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0282072.html

Till debt does us apart: Cross-country evidence on the relationship between microfinance prevalence and social distrust

Author

Listed:
  • Syed Muhammad Usman Masood
  • Rasim Özcan
  • Asad ul Islam Khan

Abstract

Economic interventions have social consequences. In this paper, we explore one such relationship, between microfinance intensity and social distrust levels reported by the low-income people. We find a significant association between microfinance intensity in a country and distrust among the poor as well as ultra-poor in cross-section using World Values Survey & European Values Survey (WVS-EVS) Wave 7 (2017–2022). We supplement these findings using empirical Bayes on a panel extending back from 7th to the 4th WVS wave (1999–2004). To deal with potential endogeneity, we run 2SLS as well as weak instruments-robust conditional instrumental variable tests and find evidence showing microfinance prevalence intensity affects distrust levels among the poor and ultra-poor households. We find no association between microfinance and distrust levels in the rich in any of the tests, potentially because the rich are not exposed to microfinance.

Suggested Citation

  • Syed Muhammad Usman Masood & Rasim Özcan & Asad ul Islam Khan, 2023. "Till debt does us apart: Cross-country evidence on the relationship between microfinance prevalence and social distrust," PLOS ONE, Public Library of Science, vol. 18(3), pages 1-20, March.
    • Handle: RePEc:plo:pone00:0282072
    DOI: 10.1371/journal.pone.0282072
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0282072
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0282072&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0282072?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Margherita Comola & Silvia Prina, 2021. "Treatment Effect Accounting for Network Changes," The Review of Economics and Statistics, MIT Press, vol. 103(3), pages 597-604, July.
    2. repec:spo:wpmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS
    3. Ghazal Zulfiqar, 2017. "Does Microfinance Enhance Gender Equity in Access to Finance? Evidence from Pakistan," Feminist Economics, Taylor & Francis Journals, vol. 23(1), pages 160-185, January.
    4. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    5. Catia Batista & Sandra Sequeira & Pedro C. Vicente, 2022. "Closing the Gender Profit Gap?," Management Science, INFORMS, vol. 68(12), pages 8553-8567, December.
    6. Bateman, Milford, 2013. "The age of microfinance: Destroying Latin American economies from the bottom up," Working Papers 39, Austrian Foundation for Development Research (ÖFSE).
    7. Niels Hermes, 2014. "Does microfinance affect income inequality?," Applied Economics, Taylor & Francis Journals, vol. 46(9), pages 1021-1034, March.
    8. repec:feb:artefa:0087 is not listed on IDEAS
    9. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    10. Batista, Catia & Sequeira, Sandra & Vicente, Pedro C, 2021. "Closing the Gender Profit Gap," CEPR Discussion Papers 15916, C.E.P.R. Discussion Papers.
    11. Maricruz Lacalle‐Calderon & José Maria Larrú & Silvia Rico Garrido & Manuel Perez‐Trujillo, 2019. "Microfinance and income inequality: New macrolevel evidence," Review of Development Economics, Wiley Blackwell, vol. 23(2), pages 860-876, May.
    12. Abhijit Banerjee & Esther Duflo & Rachel Glennerster & Cynthia Kinnan, 2015. "The Miracle of Microfinance? Evidence from a Randomized Evaluation," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 22-53, January.
    13. Kashif Abbass & Abdul Aziz Khan Niazi & Abdul Basit & Tehmina Fiaz Qazi & Huaming Song & Halima Begum, 2021. "Uncovering Effects of Hot Potatoes in Banking System: Arresting Die-Hard Issues," SAGE Open, , vol. 11(4), pages 21582440211, December.
    14. Lehner, Maria, 2009. "Group Lending versus Individual Lending in Microfinance," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 299, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    15. de Quidt, Jonathan & Fetzer, Thiemo & Ghatak, Maitreesh, 2016. "Group lending without joint liability," Journal of Development Economics, Elsevier, vol. 121(C), pages 217-236.
    16. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
    17. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages 52-84, February.
    18. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    19. Johnson, Noel D. & Mislin, Alexandra, 2012. "How much should we trust the World Values Survey trust question?," Economics Letters, Elsevier, vol. 116(2), pages 210-212.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luminita Postelnicu & Niels Hermes, 2018. "Microfinance Performance and Social Capital: A Cross-Country Analysis," Journal of Business Ethics, Springer, vol. 153(2), pages 427-445, December.
    2. Ahlin, Christian, 2015. "The role of group size in group lending," Journal of Development Economics, Elsevier, vol. 115(C), pages 140-155.
    3. Mario La Torre & Helen Chiappini (ed.), 2020. "Contemporary Issues in Sustainable Finance," Palgrave Studies in Impact Finance, Palgrave Macmillan, number 978-3-030-40248-8, March.
    4. Kamel Bel Hadj Miled & Moheddine Younsi & Monia Landolsi, 2022. "Does microfinance program innovation reduce income inequality? Cross-country and panel data analysis," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-15, December.
    5. Thomas CHUFFART & Marie-Line DUBOZ & Paipet Corine ZOGBE, 2023. "Microfinance, inclusion financière et inégalités de revenus dans l’UEMOA," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 58, pages 103-121.
    6. Binzel, Christine & Fehr, Dietmar, 2013. "Social distance and trust: Experimental evidence from a slum in Cairo," Journal of Development Economics, Elsevier, vol. 103(C), pages 99-106.
    7. Mongi Lassoued, 2021. "Control of corruption, microfinance, and income inequality in MENA countries: evidence from panel data," SN Business & Economics, Springer, vol. 1(7), pages 1-19, July.
    8. Nyarko, Samuel Anokye, 2022. "Gender discrimination and lending to women: The moderating effect of an international founder," International Business Review, Elsevier, vol. 31(4).
    9. Eric Fosu Oteng-Abayie & Kofi Amanor & Anthony Kofi Osei-Fosu, 2023. "Spatial analysis of the effect of microfinance on poverty and inequality in Ghana," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 196-231, June.
    10. Ane C. H. Jensen & Amjad Naveed, 2025. "Assessing the Role of Microfinance in Mitigating Income Inequality: New Evidence from a Global Context," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 179(1), pages 371-397, August.
    11. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Imran Rasul & Munshi Sulaiman & Jack Thiemel, 2022. "Microfinance and Diversification," Economica, London School of Economics and Political Science, vol. 89(S1), pages 239-275, June.
    12. Limbach, Peter & Rau, P. Raghavendra & Schürmann, Henrik, 2023. "The decline of trust across the U.S. finance industry," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 324-344.
    13. Yang Yang, 2023. "Hukou Identity and Economic Behaviours: A Social Identity Perspective," Erudite Ph.D Dissertations, Erudite, number ph23-02 edited by Catherine Bros & Julie Lochard, April.
    14. Shahid Razzaque, 2019. "Choice of Microfinance Contracts and Repayment Rates under Individual Lending: An Artefactual Field Experiment from Pakistan," PIDE-Working Papers 2019:166, Pakistan Institute of Development Economics.
    15. Brandon N. Cline & Claudia R. Williamson & Haoyang Xiong, 2022. "Trust, regulation, and market efficiency," Public Choice, Springer, vol. 190(3), pages 427-456, March.
    16. Christian Bjørnskov & Stefan Voigt, 2014. "Constitutional verbosity and social trust," Public Choice, Springer, vol. 161(1), pages 91-112, October.
    17. Mr. Boileau Loko & Yuanchen Yang, 2022. "Fintech, Female Employment, and Gender Inequality," IMF Working Papers 2022/108, International Monetary Fund.
    18. Wajid Khan & Ikram Ullah & Sun Shaorong, 2024. "The Income Augmenting and Budget Tightening Impacts of Microfinance: Theory and Evidence from Pakistan," SAGE Open, , vol. 14(3), pages 21582440241, August.
    19. Hameem Raees Chowdhury, 2016. "Joint-Liability in Microcredit: Evidence from Bangladesh," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 105-129, March.
    20. Masahiro Shoji & Keitaro Aoyagi & Ryuji Kasahara & Yasuyuki Sawada, 2020. "Motives behind community participation: Evidence from natural and artefactual field experiments in Sri Lanka," Pacific Economic Review, Wiley Blackwell, vol. 25(5), pages 577-600, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0282072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.