Impact of Loan Attributes on Psychological Wellbeing of Micro Borrowers and the Moderating Role of Peer Pressure

Microfinance, in Sri Lanka, aids the poor by enhancing financial inclusion, reducing both vulnerability, and poverty. It positively contributes to society by empowering women, raising living standards, and instilling financial confidence. Beyond monetary aspects, it enhances the psychological well–being of micro-borrowers as it could contribute towards reducing stress levels, strengthening dignity, self-esteem, and happiness of the same. Using data collected from a sample of 135 micro-borrowers, this study aims at investigating the psychological well-being of micro borrowers. This quantitative inquiry uncovers that psychological well-being is adversely influenced by the amount of the loan size and repayment period of the loan. Furthermore, the findings indicate that peer pressure completely moderates the relationship between repayment period of the loan and psychological well-being. This underscores the importance of microfinance institutions evaluating psychological dimensions in their programs, and of policymakers incorporating psychological well-being into regulatory frameworks.