Microfinance, despite its mixed results in economic literature, continues to proliferate in many developing countries (Rooyen et al., 2012). This research project investigates the relationship between collectivism and microfinance. It analyzes the question: how does a collectivist culture and its norms influence the ways in which borrowers spend loaned funds and interact with microfinance institutions? We generate a theoretical model for how norms of informal redistribution affect borrowing decisions and use a robust dataset of all of the loans facilitated by Kiva, a global microfinance institution, to compare microloan borrowing in countries with different cultures of collectivism. A case study of Senegal, a culturally collectivist country, includes surveys and detailed interviews of individuals and microfinance institutions (MFIs). We find that the strong social networks associated with collectivism are well-adapted to the structures of many MFIs. However, we also uncover that some of the collectivist social norms, such as norms of informal redistribution, can deter individuals from using microfinance.

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