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

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Masood S. M. U., ÖZCAN R., Khan A. u. I.

PLOS ONE, no.3, 2023 (SCI-Expanded) identifier

  • Publication Type: Article / Article
  • Publication Date: 2023
  • Doi Number: 10.1371/journal.pone.0282072
  • Journal Name: PLOS ONE
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, Agricultural & Environmental Science Database, Animal Behavior Abstracts, Aquatic Science & Fisheries Abstracts (ASFA), BIOSIS, Biotechnology Research Abstracts, Chemical Abstracts Core, EMBASE, Food Science & Technology Abstracts, Index Islamicus, Linguistic Bibliography, MEDLINE, Pollution Abstracts, Psycinfo, zbMATH, Directory of Open Access Journals
  • Open Archive Collection: AVESIS Open Access Collection
  • Istanbul University Affiliated: No

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.