Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex
32 Pages Posted: 2 Dec 2010 Last revised: 22 Feb 2011
Date Written: December 29, 2010
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: Suggested Citation