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