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Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex

32 Pages Posted: 2 Dec 2010 Last revised: 22 Feb 2011

Isabelle Agier

Université Paris I Panthéon Sorbonne, UMR 201; Université libre de Bruxelles, CERMi

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: December 29, 2010

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.

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

JEL Classification: G24, L26, O16, M13

Suggested Citation

Agier, Isabelle and Szafarz, Ariane, Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex (December 29, 2010). Available at SSRN: https://ssrn.com/abstract=1718574 or http://dx.doi.org/10.2139/ssrn.1718574

Isabelle Agier

Université Paris I Panthéon Sorbonne, UMR 201 ( email )

IEDES, 45 bis avenue de la Belle Gabrielle
Nogent sur Marne, 94736
France

Université libre de Bruxelles, CERMi

Avenue F.D. Roosevelt 21 - CP145/1
Brussels, B-1050
Belgium

Ariane Szafarz (Contact Author)

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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