Gender, Trust and Loan Repayments in Microfinance: International Evidence

Abstract

Using loan‐level data from 2017 to 2020, the paper examines the impact of trust on loan repayments by microfinance institutions for a sample of 44 countries worldwide. The results indicate that while loans involving female borrowers exhibit higher irregularity, generalised (out‐group) trust significantly improves their repayment performance and, in the process, offsets, though not reverses, the gender penalty. In contrast, in‐group trust exacerbates repayment challenges for female borrowers. Further disaggregation reveals that this impact is driven by out‐trust (or generalised trust), which overwhelms in‐trust (or particularised trust), thereby reinforcing the effect. Overall, the analysis highlights the relevance of trust and the mechanisms by which it affects loan repayments in the context of gender.