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Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex

Author Info

  • Isabelle Agier
  • Ariane Szafarz

Abstract

Women entrepreneurs are known not only to reimburse loans swifter than men, but also to receive smaller loans. However, on average women have smaller-scope business projects and are poorer than men. A deeper investigation is thus required in order to assess the existence of gender discrimination in small-business lending. This is precisely the aim of this paper. Its contribution is twofold. Firstly, it proposes a new estimation method for assessing discrimination in loan allocation. This method operationalizes the theoretical “double standard” approach developed by Ferguson and Peters (1995, Journal of Finance). Secondly, this paper applies the new methodology to an exceptionally rich database from a Brazilian microfinance institution. The empirical results point to gender discrimination. Additionally, it is shown that reducing the information asymmetry through relationship brings no remedy to the curse of the trustworthier sex.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 11-005.

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Length: 33 p.
Date of creation: Feb 2011
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/76871
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Keywords: Small Business; Microcredit; Gender; Loan Size; Denial Rate; Default;

Find related papers by JEL classification:

  • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
  • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
  • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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References listed on IDEAS
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  1. Diagne, Aliou & Zeller, Manfred & Sharma, Manohar, 2000. "Empirical measurements of households' access to credit and credit constraints in developing countries," FCND discussion papers 90, International Food Policy Research Institute (IFPRI).
  2. Beaman, Lori & Chattopadhyay, Raghebendra & Duflo, Esther & Pande, Rohini & Topalova, Petia, 2008. "Powerful Women: Does Exposure Reduce Bias?," Working Paper Series rwp08-037, Harvard University, John F. Kennedy School of Government.
  3. Kevane, Michael & Wydick, Bruce, 2001. "Microenterprise Lending to Female Entrepreneurs: Sacrificing Economic Growth for Poverty Alleviation?," World Development, Elsevier, vol. 29(7), pages 1225-1236, July.
  4. Marek Hudon, 2007. "Should Access to Credit be a Right ?," Working Papers CEB 07-008.RS, ULB -- Universite Libre de Bruxelles.
  5. Borghans, Lex & Golsteyn, Bart H.H. & Heckman, James J. & Meijers, Huub, 2009. "Gender Differences in Risk Aversion and Ambiguity Aversion," IZA Discussion Papers 3985, Institute for the Study of Labor (IZA).
  6. Boris F. Blumberg & Wilko A. Letterie, 2008. "Business Starters and Credit Rationing," Small Business Economics, Springer, vol. 30(2), pages 187-200, February.
  7. Koen Rossel-Cambier, 2008. "Combined Micro-Finance: Selected Research Questions from a Stakeholder Point of View," Working Papers CEB 08-004.RS, ULB -- Universite Libre de Bruxelles.
  8. Marc Labie & Pierre-Guillaume Méon & Roy Mersland & Ariane Szafarz, 2010. "Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda," Working Papers CEB 10-007.RS, ULB -- Universite Libre de Bruxelles.
  9. James Copestake, 2002. "Inequality and the polarizing impact of microcredit: evidence from Zambia's copperbelt," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(6), pages 743-755.
  10. Christian E. Weller, 2008. "Credit Access, the Costs of Credit and Credit Market Discrimination," Working Papers wp171, Political Economy Research Institute, University of Massachusetts at Amherst.
  11. Alain de Janvry & Craig McIntosh & Elisabeth Sadoulet, 2006. "The supply and demand side impacts of credit market information," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  12. Helena Marrez & Mathias Schmit, 2009. "Credit risk analysis in microcredit: How does gender matter?," Working Papers CEB 09-053.RS, ULB -- Universite Libre de Bruxelles.
  13. Isabelle Agier & Ariane Szafarz, 2010. "Microfinance and Gender: Is There a Glass Ceiling in Loan Size?," Working Papers CEB 10-047, ULB -- Universite Libre de Bruxelles.
  14. Marcella Corsi & Fabrizio Botti & Tommaso Rondinella & Giulia Zacchia, 2006. "Women and Microfinance in Mediterranean Countries," Development, Palgrave Macmillan, vol. 49(2), pages 67-74, June.
  15. Song Han, 2004. "Discrimination in Lending: Theory and Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 29(1), pages 5-46, 07.
  16. Alberto F. Alesina & Francesca Lotti & Paolo Emilio Mistrulli, 2013. "Do Women Pay More For Credit? Evidence From Italy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 45-66, 01.
  17. Thi Thu Tra Pham & Robert Lensink, 2007. "Lending policies of informal, formal and semiformal lenders," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(2), pages 181-209, 04.
  18. 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.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The curse of the more trustworthy gender
    by Economic Logician in Economic Logic on 2011-04-06 13:42:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:

  1. Anastasia Cozarenco & Ariane Szafarz, 2013. "Women’s Access to Credit in France: How Microfinance Institutions Import Disparate Treatment from Banks," Working Papers CEB 13-037, ULB -- Universite Libre de Bruxelles.
  2. Anastasia Cozarenco & Ariane Szafarz, 2013. "Female Access to Credit in France: How Microfinance Institutions Import Disparate Treatment from Banks," Working Papers halshs-00874448, HAL.
  3. Marc Labie & Pierre-Guillaume Méon & Roy Mersland & Ariane Szafarz, 2010. "Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda," Working Papers CEB 10-007.RS, ULB -- Universite Libre de Bruxelles.
  4. Agier, Isabelle & Szafarz, Ariane, 2013. "Microfinance and Gender: Is There a Glass Ceiling on Loan Size?," World Development, Elsevier, vol. 42(C), pages 165-181.
  5. Angela Hung & Joanne Yoong & Elizabeth Brown, 2012. "Empowering Women Through Financial Awareness and Education," OECD Working Papers on Finance, Insurance and Private Pensions 14, OECD Publishing.
  6. Aggarwal, Raj & Goodell, John, 2013. "Lending to women in microfinance: influence of social trust and national culture Lending to women in microfinance: influence of social trust and national culture," Working Paper 1317, Federal Reserve Bank of Cleveland.
  7. Aggarwal, Raj & Goodell, John W. & Selleck, Lauren J., 2015. "Lending to women in microfinance: Role of social trust," International Business Review, Elsevier, vol. 24(1), pages 55-65.
  8. Koen Rossel-Cambier, 2011. "Is Combined Microfinance an Instrument to enhance Sustainable Pro-Poor Public Policy Outcomes?," Working Papers CEB 11-013, ULB -- Universite Libre de Bruxelles.
  9. Weber, Ron & Musshoff, Oliver, 2012. "Microfinance for agricultural firms - What can we learn from bank data?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126708, International Association of Agricultural Economists.

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

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