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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 officer subjectivity on microcredit granting by exploiting an exceptionally detailed database from a Brazilian microfinance institution. The loan officers collect field data, meet with applicants, and make recommendations to the credit committee, which has the final say on both loan approval and loan size (LS). The loan officer’s subjectivity is captured through gender bias. Our estimations indeed show subjective gender gap in LS. This gap is almost exclusively attributable to loan officers. We interpret this finding as evidence that, despite monitoring and wage incentivization, microcredit officers let their subjective preferences interfere with loan granting. We conclude by suggesting alternative means to curb subjectivity in credit allocation to micro-entrepreneurs. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • 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.
    • Handle: RePEc:kap:sbusec:v:41:y:2013:i:1:p:263-275
    DOI: 10.1007/s11187-012-9429-9
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    More about this item

    Keywords

    Subjectivity; Microcredit; Gender; Loan officer; Loan size; Entrepreneurs; O16; D82; J33; L31;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, 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; Social Entrepreneurship

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