Do Female Loan Officers Mitigate Social-Financial Trade-Offs in Microfinance?

Abstract

This paper revisits social-financial trade-offs in microfinance. We theorize that workforce diversity mitigates the divergence between social and financial performance levels. We test our prediction by performing fixed-effects generalised least squares regressions on a global sample of 1257 microfinance institutions (MFIs) in 107 countries over the period 2010–2018. Confirming our prediction, the empirical results show that the proportion of female loan officers attenuates the negative relationship between the social performance and the financial performance of MFIs. We attribute our findings to the personal characteristics of female loan officers and the high repayment rates of loans that are disbursed and monitored by them. Our findings draw attention to the uneven manifestation of social-financial trade-offs among MFIs.