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Bridging the gap between migrants and the banking system

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  • Albareto, G.
  • Mistrulli, P.E.

Abstract

In this paper, we address two related issues. First, we test whether micro firms run by migrants pay more for credit than firms run by native entrepreneurs. Second, we verify whether the differences in the cost of credit between these two groups of entrepreneurs decrease as long as the informational and cultural gap narrow. To this aim we employ a large and unique data set providing us with detailed information about each overdraft loan granted by banks to sole proprietorships based in Italy. We find that firms run by migrants pay, on average, almost 70 basis points more for credit than those run by entrepreneurs born in Italy. The interest rate differential is lower for entrepreneurs born in Italy whose parents were natives of other countries (“second generation” migrants) and, among those born abroad, for migrants whose parents were natives of Italy (“Italian migrants”). These results suggest that cultural differences may matter for the functioning of the credit market. A lengthening in credit history may help migrants to “bridge the gap”. We find that, on average, interest rates lower with the length of the credit history. Furthermore, and more importantly from the paper perspective, firms run by migrants benefit more from a repeated interaction with the banking system. Finally, we find that the size of the migrant community and the improvements in bank ability to deal with cultural diversity both contribute to narrow the interest rate differential between migrant and Italian entrepreneurs.

Suggested Citation

  • Albareto, G. & Mistrulli, P.E., 2010. "Bridging the gap between migrants and the banking system," MPRA Paper 26476, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26476
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    Cited by:

    1. Núria Rodríguez‐Planas, 2018. "Mortgage finance and culture," Journal of Regional Science, Wiley Blackwell, vol. 58(4), pages 786-821, September.
    2. Diaz-Serrano, Luis & Raya, Josep M., 2014. "Mortgages, immigrants and discrimination: An analysis of the interest rates in Spain," Regional Science and Urban Economics, Elsevier, vol. 45(C), pages 22-32.
    3. Wadad Saad & Hassan Ayoub, 2019. "Remittances, Governance and Economic Growth: Empirical Evidence from MENA Region," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(8), pages 1-1, August.
    4. Teodora Cristina Barbu & Iustina Alina Boitan, 2018. "Immigrants’ impact on financial market – European countries’ evidence," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(1), pages 183-212.
    5. Giulia Bettin & Andrea F. Presbitero & Nikola L. Spatafora, 2017. "Remittances and Vulnerability in Developing Countries," World Bank Economic Review, World Bank Group, vol. 31(1), pages 1-23.
    6. Andrew Van Hulten & Abdullahi D. Ahmed, 2013. "Migrant Entrepreneurs' Access To Business Finance In Australia," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-22.
    7. Leonel Prieto & Tagi Sagafi-nejad & Balaji Janamanchi, 2013. "A Bourdieusian Perspective on Acculturation: Mexican Immigrants in the United States," Administrative Sciences, MDPI, Open Access Journal, vol. 3(4), pages 1-16, December.
    8. Lončarski, Igor & Marinč, Matej, 2020. "The political economy of relationship banking," Research in International Business and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    credit; financial integration; migration;
    All these keywords.

    JEL classification:

    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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