Discrimination in Microfinance: The Role of Credit Officers
AbstractThis paper studies how high-powered incentives may affect credit officers’ discriminatory practices in microfinance institutions. Using an agency model applied to a non-profit MFI, we argue that incentive contracts may help align the officer’s behavior with the MFI’s mission. However, since incentives are costly, and the MFI’s budget is limited, even a benevolent institution faces a trade-off between fighting discrimination and raising outreach. Welfare maximization may not imply full eradication of discriminatory practices. A non discriminating welfare-maximizing MFI may thus prefer paying smaller incentives, and letting its credit officer discriminate to some extent.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 09-017.RS.
Length: 23 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
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Microfinance; Discrimination; Credit Officers; Incentives.;
Find related papers by JEL classification:
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-16 (All new papers)
- NEP-CTA-2009-05-16 (Contract Theory & Applications)
- NEP-DEV-2009-05-16 (Development)
- NEP-MFD-2009-05-16 (Microfinance)
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