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The Critical Role Of Trust In Microfinance Success: Identifying Problems And Solutions

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  • MARC J. EPSTEIN

    (Jesse H. Jones School of Business, Rice University, 6100 Main Street, MS-531, Houston, TX 77005, USA)

  • KRISTI YUTHAS

    (School of Business Administration, Portland State University, USA)

Abstract

Trust is the basis of many aspects of microfinance operations and is a critical determinant of microfinance success. Trust governs interactions within borrowing groups, between clients and loan officers and between clients and institutions. To effectively address the many strategic challenges microfinance institutions (MFIs) face, they must design control systems that address low levels of interpersonal and institutional trust in their target populations. By increasing focus on trust, MFIs can significantly improve their financial sustainability and social impact. This paper examines trust and its important role in both existing challenges and effective solutions in the microfinance industry. Informed by prior literature and field experience, a model is developed that can provide an effective foundation for scholars and MFI leaders to better understand and manage for improved microfinance success.

Suggested Citation

  • Marc J. Epstein & Kristi Yuthas, 2011. "The Critical Role Of Trust In Microfinance Success: Identifying Problems And Solutions," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 477-497.
    • Handle: RePEc:wsi:jdexxx:v:16:y:2011:i:04:n:s1084946711001951
    DOI: 10.1142/S1084946711001951
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    References listed on IDEAS

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    1. Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
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    3. Karlan, Dean S. & Zinman, Jonathan, 2009. "Expanding Microenterprise Credit Access: Using Randomized Supply Decisions to Estimate the Impacts in Manila," Center Discussion Papers 52600, Yale University, Economic Growth Center.
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    Cited by:

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    2. Andreas Bergh & Christian Bjørnskov, 2021. "Trust Us to Repay: Social Trust, Long‐Term Interest Rates, and Sovereign Credit Ratings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(5), pages 1151-1174, August.
    3. Katarzyna Burzynska & Olle Berggren, 2015. "The Impact of Social Beliefs on Microfinance Performance," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(7), pages 1074-1097, October.
    4. Sun, Sunny Li & Ding, Zhujun & Joseph, George, 2023. "Expanding Inclusive Markets through Corruption Control: A Multilevel Modeling Analysis for a Grand Challenge," Journal of International Management, Elsevier, vol. 29(6).
    5. Hani, Umme & Akter, Shahriar & Wickramasinghe, Ananda & Kattiyapornpong, Uraiporn, 2021. "How does relationship quality sustain the rich world’s poorest businesses?," Journal of Business Research, Elsevier, vol. 133(C), pages 297-308.
    6. Denisa Henegar & Garofița Loredana Ilieș & Iulia C. Mureșan & Andra Ramona Poruțiu & Iulia Diana Arion & Felix H. Arion, 2024. "Customers’ Perception of Microfinance Services as a Tool for Rural Development: A Romanian Case Study," Agriculture, MDPI, vol. 14(7), pages 1-19, July.
    7. Dilruba Khanam & Muhammad Mohiuddin & Asadul Hoque & Olaf Weber, 2018. "Financing micro-entrepreneurs for poverty alleviation: a performance analysis of microfinance services offered by BRAC, ASA, and Proshika from Bangladesh," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-17, December.
    8. Samuel Wai Johnson, 2021. "Determinants of Access to Credit: Evidence from a Fragile Conflict-Affected Setting," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(6), pages 1475-1492, December.

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