Presentation is loading. Please wait.

Presentation is loading. Please wait.

The effect of religion in development efforts – evidence from the microfinance industry and a research agenda Roy Mersland University of Agder, Kristiansand,

Similar presentations

Presentation on theme: "The effect of religion in development efforts – evidence from the microfinance industry and a research agenda Roy Mersland University of Agder, Kristiansand,"— Presentation transcript:

1 The effect of religion in development efforts – evidence from the microfinance industry and a research agenda Roy Mersland University of Agder, Kristiansand, Norway Bert d’Espallier Hogeschool-Universiteit Brussel, Belgium Magne Supphellen Norwegian School of Economics, Bergen, Norway

2 Religion is a hot topic in development “Neglected factor” May influence: – Recipients Moral guidance, will and effort etc. Some studies (e.g. Teer Haar and Ellis, 2006) – Providers This study Policy interest: – UK, Holland, Norway, World Bank – Former president Bush

3 The debate Supporters – Faith based organizations can produce important social outcomes because: They take people’s faith into account They have access to local networks (churches) They are motivated Skeptics – Public money will be used for religious purposes – Unprofessional organizations – “Rice Christians”

4 Faith based organizations on many arenas Schools / education Hospitals / health care Nursing homes / homes for retired Here too, the effect of religion on providers’ performance remain an unsolved and debated puzzle

5 The Weber theorem “The protestant ethic and the spirit of capitalism” Claims that protestant ethic, with its focus on personal responsibility and diligence, spur economic development Protestant countries should therefore have higher economic growth than catholic countries Still uncertain whether Weber was right – What is happening in Latin countries moving from being mainly catholic to having larger protestant populations?

6 What do we know about performance differences between Christian and secular actors? Very little actually Compared to secular actors Christian development actors (Harper et al. 2008): – Receive lower portions of their budgets from public donors – Have more donors – Have more volunteers – Pay lower salaries to top management – Pay equal salaries to the rest of the employees – Have equal fundraising costs

7 Why should we expect Christian and secular actors to be different? Institutional theory: Organizations become similar when: – They all depend on the same donor (e.g. Norad) – They all need to follow the same regulations (e.g. Riksrevisjonen and Innsamlingskontrollen) – They all depend on the same networks (e.g. Bistandstorget) – They have sub-networks tailored especially for them (e.g. Bistandsnemnda)

8 Christian organizations and individuals have long been involved in entrepreneurship and finance Pawn shops in Italia 500 years ago (Franciscans) Hans Nielsen Hauge “The father of savings banks” (Duncan) 200 years ago Catholic priests’ involvement in the savings and credit cooperative movement 150 years ago and ungoing MEDA in Paraguay in the 1950-60ties David Bussau and Al Whittaker (1971) Misjonsalliansen 1991

9 There are many Christian microfinance initiatives Opportunity International – 43 MFIs in 26 countries World Visión – 41 MFIs in 41 countries Habitad International – World’s largest housing finance initiative for poor MEDA – Pioneers Catholic Relief Services – Have moved down market Funds: – Oikocredit – Eclof – Cordaid Norway – Misjonsalliansen – Strømmestiftelsen – NCA – PYM

10 Our study We use data from the microfinance industry to study the effect of Christian religion on organizational performance Data from 405 microfinance providers over up to 8 years in 73 countries 1 in 6 institutions have a Christian origin

11 Performance areas that we study Social performance – Outreach to poor clients – Outreach to female clients Financial performance – Maximizing income – Minimizing financial costs – Minimizing operational costs – Minimizing loan losses Bottom line performance – Return on assets – Financial sustainability

12 Why should Christian actors perform better? Social performance – Outreach to the poor Care for the poor is a Christian virtue – "If you would be perfect, go, sell what you possess and give to the poor, and you will have treasure in heaven; and come, follow me." – Outreach to women Female empowerment may in some contexts still be against Christian doctrine But, women are poorer and Christians should care for the poor

13 Why should Christian actors perform better? Financial performance – Maximizing income Charging high interest rates is a stark dilemma for Christian actors An antithesis of charity inherent in Christian organizations The mission is to “help” the customers – Cost of funds Fewer local networks (operate in isolation) Larger international networks (easy access to funds) Many Christian international lenders

14 Why should Christian actors perform better? Financial performance – Minimizing operational costs Being Christian should foster self-regulation and self-control (less corruption) More motivated work force Greater goals, more rewarding, a divine calling BUT; – Work goals at odds with efficiency? – Uncompetitive organizational cultures? – Low staff efficiency ratios? – Difficult to fire staff? – Only hiring staff with the “right faith”? – Too focused on the mission and lack financial control? – Management and boards focusing on theology and not efficiency? – Minimizing loan losses Slack loan enforcement because want to help the customers Ethical challenges related to loan enforcement

15 Hypotheses Christian versus secular actors hypt. numberPerformance variablesexpected relation 1 aPoorer clientsnegative 1 bFemale clientspositive 2 aoperational incomenegative 2 bFinancial costsnegative 2 coperational efficiency? 2 dLoan lossespositive 2 eBottom line perform.?

16 Initial findings simple statistics mean valuesmedian values christianseculart-statchristiansecularχ²-stat financial performance drivers portfolio yield0.350.403.61***0.300.3513.95 *** cost of funds0.050.084.78***0.050.0716.63 *** operational costs / TLP0.31 0.400.230.241.50 PaR300.070.06-0.140.03 0.11 bottom line financial performance ROA-**** OSS1.141.13- FSS0.910.961.56*0.930.983.47* social performance average loan6417491.403603870.37 % female clients0.630.734.69***0.630.7412.63 ***

17 Social performance differences – advanced statistics (RE-model) Social perf.average loansize% female clients Christian MFIs-119.0-0.067*** firm-specific controls lnta76.01**-0.02*** age3.460.001 dumregulation83.80-0.06** dumownership156.98-0.11*** contextual controls heritage-3.38-0.001 GDP per capita15.930.00 HDI-14170.29 regional dummiesyes time dummiesyes model stats n1354680 Wald χ²194.40***25.56*** R²0.160.34

18 Financial performance differences – advanced statistics (RE-model) Financial performance drivers yieldcost of fundscosts / TLPPaR30 Christian MFIs-0.025**-0.026***0.016-0.001 firm-specific controls lnta-0.0050.004-0.059***-0.001 age-0.003*0.001-0.0010.002* dumregulation-0.074**-0.006-0.0140.003 dumownership0.059**-0.0010.034-0.004 contextual controls heritage0.00 0.010.00 GDP per capita0.00 HDI0.62***0.11*0.42**-0.01 regional dummiesyes time dummiesyes model stats n1387128113771330 Wald χ²119.63***89.09***191.90***79.95*** R²0.

19 Bottom line performance differences – advanced statistics (RE-model) Bottom-line perf.ROAOSSFSS Christian MFIs-0.023***-0.031*-0.059* firm-specific controls lnta0.029***0.099***0.092*** age-0.01-0.007-0.006 dumregulation-0.013-0.012 dumownership0.0030.0420.051 contextual controls heritage-0.001-0.004-0.006 GDP per capita0.000 HDI-0.083-0.1890.041 regional dummiesyes time dummiesyes model stats n1383825799 Wald χ²97.16***135.05***174.46*** R²0.170.120.17

20 Are there differences between Catholic and Protestant actors? Financial performance drivers portfolio yieldcost of fundsPaR30costs/TLP Catholic MFIs (yes/no)-0.071**-0.033***-0.01-0.029 Protestant MFIs (yes/no)0.014-0.015**0.0060.058* firm-specific controls lnta-0.004-0.0030.006*0.005-0.006 -0.058***-0.057*** age-0.003* 0.00 0.002*0.003*-0.001 dumregulation-0.071***-0.069**-0.005 -0.003-0.002-0.016-0.014 dumownership0.044*0.043*-0.004 -0.003 0.026*0.024 contextual controlsadded regional dummiesyes time dummiesyes model stats n1317 1220 1261 1312 Wald χ²113***112***82***65***75***78***189***187*** R²0.210.20.07 0.11 0.23

21 Are there differences between Catholic and Protestant actors? Bottom line and social perf. % female clientsaverage loanFSSROA Catholic MFIs (yes/no)-0.076*-127.49-0.017*-0.080** Protestant MFIs (yes/no)-0.036*-126.67-0.067**-0.087** firm-specific controls lnta-0.033***-0.032***76.28**75.27**0.092***0.091***0.065***0.064*** age0.006* 1.882.26-0.006* -0.004** dumregulation-0.039*-0.038*82.9681.010.0380.037-0.011-0.013 dumownership-0.102***-0.097***181.98186.320.0170.021-0.017-0.014 contextual controlsadded regional dummiesyes time dummiesyes model stats n620 1294 770 1238 Wald χ²22.93***23.60***174.42***180.21***154.64***163.29***105.16***102.41*** R²0.34 0.17 0.19 0.17

22 Summary of findings Christian actors are as good in enforcing loan repayment as secular actors Christian actors struggle in reaching female clients Christian actors don’t reach poorer clients than secular actors Christian actors have lower cost of funds probably because they have better access to international networks and thereby funding – Are they being spoiled? The lower cost of funds are in Catholic institutions brought forward to the clients (lower interest rates) while the protestant actors become inefficient

23 Implications for Christian practitioners Reaching out to women is still an issue in Christian development efforts – Local partners are a challenge? Reaching the most vulnerable does not come automatically because you are a Christian organization Easy access to international funding may result in inefficiencies – Donors need to strengthen their monitoring role Christian actors disappear if they don’t assure their financial performance – International donors need to strengthen financial monitoring and somewhat loosen social monitoring? Time to use our Christian motivation to become better and not use it as a “sleeping pillow” Christian actors should be the most efficient actors servicing the most marginalized groups while assuring their long term survival

24 Remember that statistics is about averages Several Christian top performers – E.g. Diaconia FRIF in Bolivia

Download ppt "The effect of religion in development efforts – evidence from the microfinance industry and a research agenda Roy Mersland University of Agder, Kristiansand,"

Similar presentations

Ads by Google