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

Syed Muhammad Usman Masood, Rasim Özcan and Asad ul Islam Khan

PLOS ONE, 2023, vol. 18, issue 3, 1-20

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.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0282072

DOI: 10.1371/journal.pone.0282072

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