Gender Biases in Bank Lending: Lessons from Microcredit in France

Abstract

The evidence on gender discrimination in lending remains controversial. To capture gender biases in banks' loan allocations, we observe the impact on the applicants of a microfinance institution (MFI) and exploit the natural experiment of a regulatory change imposing a strict EUR 10,000 loan ceiling on microcredit. Descriptive statistics indicate that the presence of the ceiling is associated both with bank-MFI co-financing and with harsher treatment of female borrowers. To investigate causal links, we develop an econometric approach that addresses the concerns of selection biases, multicollinearity, and endogeneity. Our empirical findings suggest that the change in the MFI's gender-related attitude was triggered by banks through co-financing. Hence, we speculate that co-financing pushes ceiling-constrained MFIs to import whatever biases in loan granting that the banks are prone to. Overall, this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women's empowerment efforts made by MFIs.

The regulation of prosocial lending: Are loan ceilings effective?

“…This has to do both with additional costs and the lack of flexibility toward poorly documented clients Cull et al (2011). emphasize that complying with regulation is costly for MFIs and may lead them to exclude vulnerable borrowers, such as disadvantaged women (see alsoCozarenco & Szafarz, 2018). In contrast,Hartarska and Nadolnyak (2007) have found that regulation in general does not directly affect operational self-sustainability and outreach.…”

Women in the boardroom: a bottom–up approach to the trickle-down effect

“…The borrower's gender is an important variable in the context of microfinance since the industry claims that female empowerment is a leading motivation (Chaudhuri et al, 2020). Yet the facts are less clear-cut, since gender discrimination has been uncovered for larger loans (Garikipati et al, 2017;Cozarenco and Szafarz, 2018). The business activity reported by half of the borrowers is trade, while homeworking is claimed by 13%.…”

Sexism and Ageism in a P2P Lending Market: Evidence from Korea

“…Such studies have been conducted in different countries, in the U.S. (Fang & Munneke, 2016), Italy (Alesina et al, 2013;Bellucci et al, 2010;Calcagnini & Giombini, 2015), New Zealand (Fay & Williams, 1993), France (Brana, 2013), Germany (Stefani & Vacca, 2013), and Brazil (Agier & Szafarz). On the other hand, a few studies show that gender discrimination does not exist in the loan market (Cozarenco & Szafarz, 2015;Haines, Orser, & Riding, 1999). Cozarenco and Szafarz (2015) insist that approval for a microfinance loan was free from gender discrimination in France.…”

“…On the other hand, a few studies show that gender discrimination does not exist in the loan market (Cozarenco & Szafarz, 2015;Haines, Orser, & Riding, 1999). Cozarenco and Szafarz (2015) insist that approval for a microfinance loan was free from gender discrimination in France. Haines et al (1999) showed that lending terms do not vary by gender in Canada.…”