New Working Paper by SOCENT researcher Luminita Postelnicu and Niels Hermes available for download

Microfinance Performance and Informal Institutions: A Cross-country Analysis”, by SOCENT researcher Luminita Postelnicu and Niels Hermes, has been published in the CERMi-CEB working paper series (WP 15-023) and is available for download on the SOCENT website.

Abstract: This paper investigates the relationship between the extent to which informal institutions are developed at the country level and the financial and social performance of MFIs, using data from institutions active in 100 countries. Based on the theoretical literature discussing the economic role of informal institutions such as trust, beliefs, norms and values, the authors hypothesize that microfinance is more successful, both in terms of their financial and social aims, in countries with stronger informal institutions. They test this hypothesis using various direct and indirect measures of informal institutions and link them to measures of financial and social performance of MFIs. Their empirical results are generally supportive of their hypothesis.