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Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil

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  • Isabelle Agier
  • Ariane Szafarz

Abstract

This paper estimates the impact of loan officers' subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian microfinance institution. Loan officers collect field data, meet with applicants, and make recommendations to the credit committee that in turn has the final say on both loan approval and loan size. The loan officers' subjectivity is captured through the lens of disparate treatment based on gender. Indeed, our estimations show that an unfair gender gap is observed in loan size, and that this gap is almost exclusively attributable to the loan officers. We interpret this finding as evidence that, despite monitoring and wage incentivization, microcredit officers keep letting their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-016.

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Length: 18 p.
Date of creation: May 2011
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/86108

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Keywords: Subjectivity Loan Size; Microcredit; Gender; Loan Officer; Entrepreneurs;

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References

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Citations

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Cited by:
  1. Jessica Schicks, 2012. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," Working Papers CEB 12-017, ULB -- Universite Libre de Bruxelles.
  2. Simon Cornée & Ariane Szafarz, 2013. "Vive la Différence: Social Banks and Reciprocity in the Credit Market," Post-Print halshs-00874615, HAL.
  3. Simon Cornée, 2012. "The Relevance of Soft Information for Predicting Small Business Credit Default: Evidence from a Social Bank," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201226, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  4. Anastasia Cozarenco & Ariane Szafarz, 2013. "Female Access to Credit in France: How Microfinance Institutions Import Disparate Treatment from Banks," AMSE Working Papers 1350, Aix-Marseille School of Economics, Marseille, France, revised Dec 2013.
  5. Amélie Artis & Simon Cornée, 2013. "Transformation informationnelle, certification et intermédiation financière : le cas de la banque solidaire," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201326, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  6. Shchetinin, Oleg & Wollbrant, Conny, 2013. "The intermediary role of microloan officers: Evidence from Ethiopia," Working Papers in Economics 581, University of Gothenburg, Department of Economics.

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