Banking on Cooperation: Testing Evolutionary Theories of Human Cooperation via Microfinance Loans

Abstract

Explaining the evolution of cooperation has been a major scientific challenge since Darwin. Natural selection is expected to favour behaviours that enhance individual fitness, yet cooperative behaviours which benefit others are widespread in nature. Compared to other mammal species, including our closest primate relatives, the scope, scale, and variability of cooperation displayed by humans is particularly surprising, extending to cooperation between non-relatives in transient interactions. These unusual cooperative abilities are arguably a primary factor responsible for the global ecological dominance of the human species.

Various theories have been proposed to explain the evolutionary puzzle of cooperation in both humans and other species. In this thesis I attempt to test some of these theories, using microfinance loan groups as a study system. In microfinance groups, individuals must cooperate with one another by contributing to the collective repayment of shared loans. However, if the personal costs of repayment are too high, borrowers may choose to withhold cooperation, instead relying on the efforts of others in their group. If too many borrowers in a group decide not to cooperate, the group could fail to meet its repayment obligations, and consequently all members will lose access to loans.

Given evidence of generally high repayment rates in microfinance groups, I attempt to explain what behavioural mechanisms could be motivating borrowers to repay their loans and help each other. I use Bayesian meta-analysis and hurdle modelling methods to identify the main predictors of repayment in microfinance groups, and assess the uncertainty, heterogeneity and generalizability of my results. Based on my findings I argue there is evidence for evolutionary mechanisms in supporting cooperation in microfinance groups, albeit with substantial variation in the relative importance of mechanisms due to differences between study populations and study design choices. I identify opportunities for future research into cooperation and microfinance lending, and demonstrate the potential of evolutionary theory for informing research questions from the natural and social sciences.