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Microfinance and Gender: Is There a Glass Ceiling in Loan Size?

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  • Isabelle Agier
  • Ariane Szafarz

Abstract

Microfinance institutions serve a majority of female borrowers. But do men and women benefit from same credit conditions? This paper investigates this issue by presenting an original model and testing its predictions on an exceptional database including 34,000 loan applications from a Brazilian microfinance institution over an eleven-year period. The model considers a lender that offers standardized loan contracts with a fixed interest rate, which is common practice in microfinance. It demonstrates that biased loan attribution may lead to three different outcomes, depending on the bias intensity: 1) denial of all applications from a given group, 2) a “glass ceiling” effect, namely loan downsizing of the largest projects from a given group, or 3) no impact. The empirical analysis detects no gender bias in approval rate, but uncovers a glass ceiling effect hurting female applicants. Moreover, this effect is insensitive to the credit officer's gender. In conclusion, the good news is that the microfinance practice does ensure a fair access to credit. The bad news is the presence of a glass ceiling faced by female entrepreneurs with larger projects.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 10-047.

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Length: 33 p.
Date of creation: Sep 2010
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/64289

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Keywords: Microcredit; Microfinance; Discrimination; Loan Size; Loan Approval; Gender;

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References

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  1. Helena Marrez & Mathias Schmit, 2009. "Credit risk analysis in microcredit: How does gender matter?," Working Papers CEB, ULB -- Universite Libre de Bruxelles 09-053.RS, ULB -- Universite Libre de Bruxelles.
  2. Lex Borghans & Bart H. H. Golsteyn & James J. Heckman & Huub Meijers, 2009. "Gender Differences in Risk Aversion and Ambiguity Aversion," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(2-3), pages 649-658, 04-05.
  3. Bellucci, Andrea & Borisov, Alexander & Zazzaro, Alberto, 2010. "Does gender matter in bank-firm relationships? Evidence from small business lending," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2968-2984, December.
  4. Ariane Szafarz, 2008. "An Alternative to Statistical Discrimination," ULB Institutional Repository 2013/14329, ULB -- Universite Libre de Bruxelles.
  5. Armendáriz, Beatriz & Szafarz, Ariane, 2011. "On mission drift in microfinance institutions," MPRA Paper 31041, University Library of Munich, Germany, revised 2010.
  6. Marc Labie & Pierre-Guillaume Méon & Roy Mersland & Ariane Szafarz, 2010. "Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-007.RS, ULB -- Universite Libre de Bruxelles.
  7. Marcella Corsi & Fabrizio Botti & Tommaso Rondinella & Giulia Zacchia, 2006. "Women and Microfinance in Mediterranean Countries," Development, Palgrave Macmillan, vol. 49(2), pages 67-74, June.
  8. Blanchard, Lloyd & Zhao, Bo & Yinger, John, 2008. "Do lenders discriminate against minority and woman entrepreneurs?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 467-497, March.
  9. Alberto F. Alesina & Francesca Lotti & Paolo Emilio Mistrulli, 2013. "Do Women Pay More For Credit? Evidence From Italy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 45-66, 01.
  10. Christian Weller, 2009. "Credit Access, the Costs of Credit and Credit Market Discrimination," The Review of Black Political Economy, Springer, vol. 36(1), pages 7-28, March.
  11. Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2009. "Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(4), pages 651-672, 06.
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Citations

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Cited by:
  1. D’Espallier, Bert & Hudon, Marek & Szafarz, Ariane, 2013. "Unsubsidized microfinance institutions," Economics Letters, Elsevier, vol. 120(2), pages 174-176.
  2. Isabelle Agier & Ariane Szafarz, 2013. "Subjectivity in credit allocation to micro-entrepreneurs: evidence from Brazil," Small Business Economics, Springer, vol. 41(1), pages 263-275, June.
  3. Simon Cornée & Ariane Szafarz, 2013. "Vive la Différence: Social Banks and Reciprocity in the Credit Market," Post-Print halshs-00874615, HAL.
  4. Claudia Piras & Andrea Filippo Presbitero & Roberta Rabellotti, 2013. "Definitions Matter: Measuring Gender Gaps in Firms' Access to Credit," Mo.Fi.R. Working Papers 90, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  5. D'Espallier, Bert & Guérin, Isabelle & Mersland, Roy, 2011. "Women and Repayment in Microfinance: A Global Analysis," World Development, Elsevier, vol. 39(5), pages 758-772, May.
  6. Koen Rossel-Cambier, 2010. "Do Multiple Financial Services Enhance the Poverty Outreach of Microfinance Institutions?," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-058, ULB -- Universite Libre de Bruxelles.
  7. Anastasia Cozarenco & Ariane Szafarz, 2013. "Female Access to Credit in France: How Microfinance Institutions Import Disparate Treatment from Banks," Working Papers halshs-00874448, HAL.
  8. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201402, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  9. Jessica Schicks, 2012. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," Working Papers CEB, ULB -- Universite Libre de Bruxelles 12-017, ULB -- Universite Libre de Bruxelles.
  10. Aggarwal, Raj & Goodell, John, 2013. "Lending to women in microfinance: influence of social trust and national culture Lending to women in microfinance: influence of social trust and national culture," Working Paper 1317, Federal Reserve Bank of Cleveland.
  11. Isabelle Agier & Ariane Szafarz, 2011. "Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex," Working Papers CEB, ULB -- Universite Libre de Bruxelles 11-005, ULB -- Universite Libre de Bruxelles.
  12. Weber, Ron & Musshoff, Oliver, 2012. "Microfinance for agricultural firms - What can we learn from bank data?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 126708, International Association of Agricultural Economists.
  13. Koen Rossel-Cambier, 2011. "Is Combined Microfinance an Instrument to enhance Sustainable Pro-Poor Public Policy Outcomes?," Working Papers CEB, ULB -- Universite Libre de Bruxelles 11-013, ULB -- Universite Libre de Bruxelles.
  14. Beatriz Armendariz & Bert D'Espallier & Marek Hudon & Ariane Szafarz, 2011. "Subsidy Uncertainty and Microfinance Mission Drift," Working Papers CEB, ULB -- Universite Libre de Bruxelles 11-014, ULB -- Universite Libre de Bruxelles.

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