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

Abstract

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. AbstractMicronance institutions serve a majority of female borrowers. But do men and women benet 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 micronance institution over an eleven-year period. The model considers a lender that oers standardized loan contracts with a xed interest rate, which is common practice in micronance. It demonstrates that biased loan attribution may lead to three dierent outcomes, depending on the bias intensity: 1) denial of all applications from a given group, 2) a glass ceiling eect, 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 eect hurting female applicants. Moreover, this eect is insensitive to the credit ocer's gender. In conclusion, the good news is that the micronance 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.

Gender Biases in Bank Lending: Lessons from Microcredit in France

“…This confirms previous evidence on Brazilian microfinance (Agier and Szafarz, 2013a). Regarding the interplay of gender concern and regulation change, our findings are the following.…”

“…Table 2 shows that the sizes of the loans granted by the MFI to women exhibit similar features. This gender-specific credit rationing is in line with previous evidence by Agier and Szafarz (2013a), who detect a "glass-ceiling effect" at a Brazilian MFI, meaning that loan approval is not discriminatory but that women with ambitious projects tend to receive smaller loans than men. Presumably, the fact that gender-related disparate treatment in microcredit affects credit conditions rather than loan approval is linked to the microfinance tradition of serving female borrowers (Armendariz and Morduch, 2010).…”

“…Alesina et al (2013) and Agier and Szafarz (2013a) show that female micro-entrepreneurs receive smaller loans than male ones in Italy and Brazil, respectively. More generally, Bagus et al (2015) discuss the ethicality of banks' actions.…”

Gender discrimination in online peer-to-peer credit lending: evidence from a lending platform in China

“…Women are kept being more credit-constrained than men by MFIs (Berger, 1990;Fletschner, 2009). Built on a unique database from Brazilian microfinance institution over an eleven-year period, Agier and Szafarz (2013) detected no discriminatory practice in the approval rate, but uncovered a gender gap in loan size. They concluded that glass ceiling effect was greater for female borrowers than for male borrowers.…”

“…Moreover, due to a lack of data, studies of discrimination in developing countries are even more scarce (Agier & Szafarz, 2013). Fortunately, the presence of online peer-to-peer lending provides a unique opportunity to empirically examine and understand this phenomenon in developing countries.…”