The influence of societal sector institutions in promoting lender‐borrowers network relationships

Purpose – The aim of writing this paper is to demonstrate how societal sector institutions influence the lender‐borrower network relationships. Design/methodology/approach – The objectives are achieved by analyzing data based on an “Institutional Network” theoretical frame of references. The methodological approach used in the research is of a qualitative nature. Findings – The research result shows that the societal sector institutions, like country culture, religion, political system, legal system, government, and family/clan, have direct and indirect impact on the lender‐borrower network relationship, especially in the case of financing rural‐based small and cottage industries by interest‐free banks. Originality/value – The ideas of an interest‐free banking system and its financing towards rural‐based small and cottage industries. The research is useful both to financing organizations based on interest free principles and also to small and cottage industry owners in developing as well as developed nations, where this specific financing system is working.