Finance and social responsibility in the informal economy
Subtitle: institutional voids, globalization and microfinance institutions
By: Hao Liang, Christopher Marquis, Sunny Li Sun
Contributors: Marquis, Christopher, author; Sun, Sunny Li, author; Harvard Business School
Series: Working paper / Harvard Business School -- 15-029; Working paper (Harvard Business School) -- 15-029
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 40
Description: We examine the heterogeneous effects of globalization on the interest rate setting by microfinance institutions (MFIs) around the world. We consider MFIs as a mechanism to overcome the institutional void of credit for small entrepreneurs in developing and emerging economies. Using a large global panel of MFIs from 119 countries, we find that social globalization that embraces egalitarian institutions on average reduces MFIs' interest rates. In contrast, economic globalization that embraces neoliberal institutions on average increases MFIs' interest rates. Moreover, the proportions of female borrowers and of poorer borrowers negatively moderate the relationship between social globalization and MFI interest rate, and positively moderate the relationship between economic globalization and MFI interest rate. This paper contributes to understanding how globalization processes can both ameliorate and exacerbate challenges of institutional voids in emerging and developing economies.
Notes: "October 2014" -- Publisher's website.

Includes bibliographical references (pages 27-29).