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Microfinance and Ethnic Diversity
Author(s) -
Awaworyi Churchill Sefa
Publication year - 2017
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12310
Subject(s) - microfinance , ethnic group , diversity (politics) , cultural diversity , economics , business , development economics , economic geography , political science , economic growth , law
We argue that understanding why the levels of success vary across microfinance institutions ( MFI s) requires not only an understanding of the interplay between MFI s, MFI ‐specific practices and macroeconomic factors, but also what role ethnic diversity plays. Thus, this study hypothesises a relationship between ethnic diversity and MFI performance. We measure ethnic diversity using indices of fractionalisation. We find that fractionalisation is associated with poorer MFI financial performance and leads to MFI mission drift. Trust and strong social networks are important mechanisms of influence; they are lower in more fractionalised countries. Results are robust to several sensitivity checks.