Sex and Credit: Is There a Gender Bias in Microfinance?
AbstractThis paper examines the effects of group identity in the credit market. Exploiting the quasirandom assignment of first-time borrowers to loan officers of a large Albanian lender, we test for own-gender bias in the loan officer-borrower match. We find that borrowers pay on average 29 basis points higher interest rates when paired with a loan officer of the other sex. The results indicate the presence of a taste-based rather than a statistical bias, as borrowers’ likelihood of going into arrears is independent of loan officer gender. Ending up with an opposite-sex loan officer also affects demand for credit, with borrowers being 11.5 percent less likely to return for a second loan. The bias is more pronounced when the social distance, as proxied by difference in age between the loan officer and the borrower, increases and when financial market competition declines. This is consistent with theories that predict a tastebased bias to be stronger when the psychological costs of being biased are lower and the discretion in setting interest rates is higher. Taken together, the findings suggest that owngender preferences can have substantial welfare effects.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-101.
Date of creation: 2011
Date of revision:
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Web page: http://center.uvt.nl
Identity; interest rates; gender; loan officers; microfinance;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-BAN-2011-09-22 (Banking)
- NEP-DEV-2011-09-22 (Development)
- NEP-HME-2011-09-22 (Heterodox Microeconomics)
- NEP-MFD-2011-09-22 (Microfinance)
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