Microcredit and Gender: Are There Differences in the Credit Conditions?
| Autor | Salgado, Camila Cristina Rodrigues |
| Cargo | Report |
Introduction
By means of a distinguished approach to granting credit, microcredit programs stand out as a socioeconomic alternative of social insertion and the fight against poverty (Arbolino, Carlucci, Cira, Yigitcanlar, & Ioppolo, 2018; Bezboruah & Pillai, 2017; Dutta & Banerjee, 2018), placing the credit granted as a propellant for formal and informal microenterprises (Alves & Camargos, 2014). In general, microcredit provides financing to low income families to let them acquire essential assets and deal with certain unexpected expenses (Akotey & Adjasi, 2016).
In this context, a factor that has gained prominence in discussions is female participation in microcredit programs. Around the world, the level of microcredit is estimated to be more than 12 billion US dollars, and its beneficiaries include nearly 200 million clients, of whom 3/4 are women (Wahidi, 2017). In Brazil, in the third quarter of 2015, women represented 62.13% of the clients assisted by the National Program of Guided Productive Microcredit (Ministerio do Trabalho e Previdencia Social, 2015). It is noteworthy that microfinance practitioners and policymakers target women to help them earn income, gain financial independence and strengthen their decision-making power within the household and society (Zhang & Posso, 2017).
In this regard, some studies that aimed to evaluate conditioners or factors that influence the accessibility of microcredit have used gender differences among their variables, but from different perspectives and with equally differentiated results. Mazumder, Dastidar and Bhandari (2017) analyzed the factors underlying credit accessibility of rural households among rural micro-entrepreneurs in India. They showed that gender of the entrepreneur has a dominant and significant impact on access to credit, indicating gender discrimination in access to credit where male respondents were more favored in accessing formal credit than females.
The study by Wahidi (2017) emphasized the characteristics of beneficiaries of microcredit allocated by MFIs (microfinance institutions) in Lebanon. The results seem to show that NGO MFIs give more credit to men than to women. In addition, the results of the interviews with MFI administrative officials seem to show that male loan officers may distinguish between male and female beneficiaries and prefer to grant microcredit to a man.
Bahta, Strydom and Donkor (2017) examined the extent to which gender influences access to microcredit for farmers in Eritrea, Africa. The empirical results showed that women are less likely to be able to access microcredit, compared to men. The men have a 34.8% probability of accessing microcredit while women are only likely to access microcredit at 17.9% (the mean difference of microcredit access is 16.9%). The implication is that men have a 16.9% higher probability of accessing microcredit than women, suggesting that women have limited access to microcredit.
Other data can be found in Gosh and Vinod's (2017) study that analyze Indian data and suggest a significant disparity in both access and use of gender financing. The study reveals that, on average, female-headed families are 8% less likely to have access to formal financing. They are also 6% more likely to have access to informal financing that male-headed families.
On the other hand, studies conducted in the Brazilian context have demonstrated a positive scenario in relation to women and their participation in microcredit programs. Soares, Barreto and Azevedo (2011), for example, have investigated the importance of some factors that facilitate the way out of poverty for Crediamigo/BNB clients. They discovered that there are more women than men as active clients in this program, and women present a lower level of default. This last aspect is corroborated by Alves and Camargo (2014), who evaluated the default conditioning factors in microcredit operations granted by two microcredit institutions. They found out that men presented an increase of 7.3% in the default probability, indicating that women have a lower credit risk when compared to men.
A factor that may be affected by women's lower default is the amount contracted with microcredit providers. Therefore, it is expected that the contracted value has a positive correlation with female gender, an aspect that was not yet explored in depth in Brazilian literature. However, in the study conducted by Agier and Szafarz (2013), whose aim was to test if both women and men would benefit from the same credit conditions in Brazilian microcredit institutions, the authors discovered that there is no gender bias related to loan denials, but there is differentiated treatment regarding credit conditions.
Thus, the authors noted that there is a glass ceiling effect--in reference to a barrier that is so subtle that it is transparent, but strong enough to make it impossible for women to ascend (Steil, 1997)--in which the amount of granted credit is disproportionate in relation to gender, with women being negatively affected. It is worth emphasizing that analyses regarding the glass ceiling were also developed from different perspectives, and the most common is related to work (in organizations), as in Steil's (1997) study.
It is also worth noting that there are several theoretical reasons that explain a possible gender difference in the access to financial services, such as: (a) there may be taste discrimination in the sense that the financial system is dominated by man and the barriers related to financial services are consequently higher for women than men; (b) there may be statistical discrimination in the sense that a lower education level and involvement in the formal market economy is a barrier that prevent women from having access to formal financial services; (c) a lower involvement in the formal market economy may also reflect a distribution of traditional roles in society, in which women focus on domestic activities and men focus on the market economy (Al-Shami, Majid, Mohamad, & Rashid, 2017; Aterido, Beck, & Iacovone, 2013; Corsi & Angelis, 2017).
Therefore, since the literature indicates that there is a lower default among women and taking into account that the aspect of gender influence on the financing value is disproportionate, although little explored in studies, the aim of this research was to evaluate the relationship between gender and the amounts which were granted in microcredit operations. In order to do so, the article is structed as follows: first, there is a discussion about the theoretical aspects related to microcredit and, more specifically, regarding the female role in this scenario; then, there is a description of the methodology; finally, there is a brief discussion regarding the results obtained in the study and the conclusion.
Theoretical Background
Microcredit: general discussions
Small businesses, urban or rural, formal or informal, have suffered from a shortage of capital, resulting in low productivity and low incomes, which prevents the multiplier effect of income and the inclusive economic development in macroeconomic terms (Arbolino et al., 2018; Zouain & Barone, 2007). In this sense, in most countries around the world, credit has shown to be an instrument that leverages development, placing it as a necessary condition for making resources flow in economies (Enimu, Eyo, & Ajah, 2017).
In fact, one thing that has been perceived in literature is that credit support has been strongly pointed out as of the big challenges to boost the development of formal and informal microenterprises, contributing to income and employment generation for the development of backward regions (Alves & Camargos, 2014; Carlucci, Cira, Immordino, Ioppolo, & Yigitcanlar, 2017; Garcia-Perez, Munoz-Torres, & Fernandez-Izquierdo, 2017; Rakib, Chakrabarty, & Winn, 2018). This happens because, without access to financial resources, individuals face difficulties in starting, maintaining and expanding their economic activities, sustaining poverty and income inequality (Bilau & St-Pierre, 2018; Chliova, Brinckmann, & Rosenbusch, 2015; Soares, Barreto, & Azevedo, 2011).
In Brazil, following the logic outlined above, microcredit is the most visible and developed part within a complex set of tools for generating income and combating poverty. This means low-value loans for small entrepreneurs, microenterprises and small-sized companies that have no access to the traditional financial system, mainly because they cannot offer real guaranties (Al-Shami et al., 2017; Serrano-Cinca, Gutierrez-Nieto, & Reyes, 2016).
Microcredit programs can therefore be considered one of the most popular development strategies (Enimu et al., 2017; Ghosh & Neogi, 2017; Ugwuja & Nweze, 2018; Wahidi, 2017), whose objective is to serve the poor, many of whom do not have access to traditional banking services, without the need for the borrower to present some kind of guarantee (Al-Shami et al., 2017; Armstrong, Ahsan, & Sundaramurthy, 2018; Milanov, Justo, & Bradley, 2015; Thanh & Duong, 2017; Wahidi, 2017).
Given these characteristics, there seems to be a consensus that microcredit is an important contemporary mechanism for reducing poverty and social inequalities, which has led several developing countries to stimulate this modality of credit, even as a development policy (Arbolino et al., 2018; Bezboruah & Pillai, 2017; Bidisha, Khan, Imran, Khondker, & Suhrawardy, 2017; Dutta & Banerjee, 2018; Li, Gan, & Yu, 2011; Thanh & Duong, 2017; Ugwuja & Nweze, 2018).
In addition, studies also point out the influence that microcredit has on welfare, such as the case developed by Al-Shami, Majid, Mohamad and Rashid (2017), indicating that productive microcredit loans have a significant positive influence over family welfare.
In general, borrowers make investments to create, resume or develop an activity capable of generating income, but also to implement life projects such as the purchase of...
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