The role of national culture in the relationship between microfinance outreach and sustainability: a correlated random effects approach
Cross Cultural & Strategic Management
ISSN: 2059-5794
Article publication date: 14 July 2020
Issue publication date: 3 September 2020
Abstract
Purpose
This study investigates the role of national culture between outreach and sustainability of microfinance institutions (MFIs). Despite microfinance's deep embeddedness in cultural contexts, research on the influence of national culture on MFI performance is rather sparse. This paper seeks to fill this gap and, based on cross-country microfinance data, attempts to explain the outreach-sustainability relationship in reference to cultural factors.
Design/methodology/approach
An unbalanced panel, consisting of 5,741 MFI-year observations of 1,232 MFIs from 43 countries in six regions, is drawn from the Microfinance Information Exchange (MIX) Market database. Two different econometric models are tested. Model 1 estimates the direct effect of outreach on sustainability, using a fixed-effects estimator. Model 2 examines the moderation effect of national culture on outreach-sustainability relationship, employing correlated random effects approach.
Findings
The results show that depth of outreach and financial sustainability of MFIs are negatively related, and the relationship is moderated by national culture. Power distance and uncertainty avoidance positively moderate the outreach-sustainability relationship, whereas individualism and masculinity negatively moderate the relationship.
Originality/value
The findings suggest that the national culture where MFIs are located plays an important contingent role in their performance and that the magnitude of the trade-off effect varies from culture to culture. The research thus provides further insight in the trade-off debate and contributes to literatures of both microfinance and cross-cultural management.
Keywords
Acknowledgements
The authors would like to thank four anonymous reviewers whose comments and suggestions helped improve the article. The authors, however, remain solely responsible for the contents as well as any errors or omissions.
Citation
Zainuddin, M., Mahi, M., Akter, S. and Yasin, I.M. (2020), "The role of national culture in the relationship between microfinance outreach and sustainability: a correlated random effects approach", Cross Cultural & Strategic Management, Vol. 27 No. 3, pp. 447-472. https://doi.org/10.1108/CCSM-12-2019-0219
Publisher
:Emerald Publishing Limited
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