The effect of borrower societal culture on microlending: Does culture influence funding amount?

Abstract

We examine the role of borrower societal culture in influencing microlender funding amounts. Prior research has highlighted the ‘warm glow’ of giving as motivating lenders, finding that certain individual attributes of borrowers can lead to better outcomes for them. Recent work, however, suggests that the borrower’s societal culture may be an important contextual factor to consider. We use societal culture theory from Project GLOBE, a cross-cultural management study that includes 63 cultures, to hypothesise that uncertainty avoidance, future orientation and power distance practices of a borrower’s societal cultures will influence the loan amount. Using a sample of 506,671 microlending projects from Kiva, we find that all three cultural practice dimensions are negatively related to funding amounts. The findings are robust across a series of additional tests. We discuss the theoretical and practical implications of these findings in international funding decisions and their value in explaining low-stakes decisions in low-information contexts.