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Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil

  • Isabelle Agier
  • Ariane Szafarz

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.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/148889.

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Date of creation: 2013
Date of revision:
Publication status: Published in: Small business economics (2013) v.41 n° 1,p.263-275
Handle: RePEc:ulb:ulbeco:2013/148889
Note: SCOPUS: ar.j
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