Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda

Labie, Marc; Meon, Pierre-Guillaume; Mersland, Roy; Szafarz, Ariane

doi:10.2139/ssrn.1722122

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Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda

25 Pages Posted: 23 Dec 2010 Last revised: 7 Jan 2014

See all articles by Marc Labie

Pierre-Guillaume Meon

Université Libre de Bruxelles (ULB); Université Robert Schuman Strasbourg III

Ariane Szafarz

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

There are 2 versions of this paper

Date Written: May 30, 2010

Abstract

This paper studies the relationship between a microfinance institution (MFI) and its credit officers when the latter are biased against a subgroup of the clientele. Using survey data from Uganda, we provide evidence that credit officers are more biased against disabled borrowers than other employees. In line with the evidence, we then build an agency model of a non-profit MFI and a discriminatory credit officer. Since incentive schemes are costly, and the MFI’s budget is limited, even a non discriminating welfare-maximizing MFI may prefer paying smaller incentivizing compensation, and letting its credit officer discriminate to some extent.

Keywords: Microfinance, Discrimination, Credit Officers, Incentives

JEL Classification: G21, O16, J33, L3

Suggested Citation: Suggested Citation

Labie, Marc and Meon, Pierre-Guillaume and Mersland, Roy and Szafarz, Ariane, Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda (May 30, 2010). Available at SSRN: https://ssrn.com/abstract=1722122 or http://dx.doi.org/10.2139/ssrn.1722122