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Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda

  • Marc Labie
  • Pierre-Guillaume Méon
  • Roy Mersland
  • Ariane Szafarz

This paper studies the relationship between a microfinance institution and its credit officers when the latter are biased against a subgroup of the clientele. Using survey data from Uganda, we provide evidence that credit officers are more biased against disabled borrowers than other employees. In line with the evidence, we then build an agency model of a non-profit MFI and a discriminatory credit officer. Since incentives are costly, and the MFI’s budget is limited, even a non discriminating welfare-maximizing MFI may prefer paying smaller incentives, and letting its credit officer discriminate to some extent.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/54003/1/RePEc_sol_wpaper_10-007.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 10-007.RS.

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Length: 29 p.
Date of creation: 2010
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:10-007
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  1. Ken Cavalluzzo & John Wolken, 2005. "Small Business Loan Turndowns, Personal Wealth, and Discrimination," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2153-2178, November.
  2. Matthew Warning & Elisabeth Sadoulet, 1998. "The performance of village intermediaries in rural credit delivery under changing penalty regimes: Evidence from Senegal," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 115-138.
  3. Hartarska, Valentina M., 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists.
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  7. Sumit Agarwal & Faye H. Wang, 2009. "Perverse incentives at the banks? Evidence from a natural experiment," Working Paper Series WP-09-08, Federal Reserve Bank of Chicago.
  8. Amin, S. & Rai, A.S. & Topa, G., 1999. "Does Microcredit Reach the Poor and Vulnerable? Evidence from Northern Bangldesh," Working Papers 99-06, C.V. Starr Center for Applied Economics, New York University.
  9. 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.
  10. Marc Labie & Anaïs Périlleux, 2008. "Corporate governance in microfinance: credit unions," Working Papers CEB 08-003.RS, ULB -- Universite Libre de Bruxelles.
  11. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, June.
  12. Hartarska, Valentina, 2005. "Governance and performance of microfinance institutions in Central and Eastern Europe and the Newly Independent States," World Development, Elsevier, vol. 33(10), pages 1627-1643, October.
  13. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  14. McIntosh, Craig & Wydick, Bruce, 2005. "Competition and microfinance," Journal of Development Economics, Elsevier, vol. 78(2), pages 271-298, December.
  15. Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
  16. Kathleen Beegle & Wendy A. Stock, 2003. "The Labor Market Effects of Disability Discrimination Laws," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
  17. Beatriz Armendariz & Ariane Szafarz, 2009. "On Mission Drift In Microfinance Institutions," Working Papers CEB 09-015.RS, ULB -- Universite Libre de Bruxelles.
  18. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
  19. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, June.
  20. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
  21. Mersland, Roy & Øystein Strøm, R., 2009. "Performance and governance in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 662-669, April.
  22. Aubert, Cécile & de Janvry, Alain & Sadoulet, Elisabeth, 2009. "Designing credit agent incentives to prevent mission drift in pro-poor microfinance institutions," Journal of Development Economics, Elsevier, vol. 90(1), pages 153-162, September.
  23. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
  24. Black, Harold & Schweitzer, Robert L & Mandell, Lewis, 1978. "Discrimination in Mortgage Lending," American Economic Review, American Economic Association, vol. 68(2), pages 186-91, May.
  25. William G. Johnson & James Lambrinos, 1985. "Wage Discrimination against Handicapped Men and Women," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 264-277.
  26. Schreiner, Mark & Graham, Douglas H. & Cortes-Fontcuberta, Manuel & Coetzee, Gerhard K. & Vink, Nick, 1997. "Racial Discrimination In Hire/Purchase Lending In Apartheid South Africa," 1997 Annual meeting, July 27-30, Toronto, Canada 21026, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  27. Mark Schreiner, 2001. "Credit Scoring for Microfinance: Can It Work?," Development and Comp Systems 0108003, EconWPA, revised 27 Dec 2001.
  28. Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-92, November.
  29. D. Storey, 2004. "Racial and Gender Discrimination in the Micro Firms Credit Market?: Evidence from Trinidad and Tobago," Small Business Economics, Springer, vol. 23(5), pages 401-422, December.
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