Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex

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.

Number of Pages in PDF File: 32

Keywords: Small Business, Microcredit, Gender, Loan Size, Denial Rate, Default

JEL Classification: G24, L26, O16, M13

working papers series