We find that institutional investors' local culture of religiosity influences their stock lending decisions and induces short-sale constraints on the underlying stocks. Firms with higher ownerships by blockholders located in more religious counties are associated with higher utilization of lendable shares. This effect is driven by a lower supply of, rather than a higher demand for, lendable shares. Stock lending fees of such firms are higher, and higher short interests of such firms more strongly predict lower future stock returns. Our findings suggest that the cultural norms of institutional investors can create market friction through the stock lending channel.