Individualism Reduces Borrower Discouragement

Borrower discouragement contributes to reduce access to credit worldwide. In this paper, we test the hypothesis that individualism influences discouragement of borrowers. We use data on borrower discouragement and individualism at the firm level for a large dataset of 32,000 firms from 59 countries. We find that firms in individualistic countries are less likely to be discouraged from applying for loans. We further find that individualistic norms reduce borrower discouragement through its impact on lower corruption in lending and weak informal support networks. Our results hold after controlling for other cultural dimensions, addressing potential endogeneity and sample selection issues. Thus, our findings provide evidence that individualism reduces borrower discouragement, thereby improving access to credit of firms.