"Gender Biases in Bank Lending: Lessons from Microcredit in France", by SOCENT researchers A. Cozarenco and A. Szafarz, now available on-line

The evidence on gender discrimination in lending remains controversial. To capture gender biases in banks’ loan allocations, SOCENT researchers Anastasia Cozarenco and Ariane Szafarz (CERMi, ULB) observe the impact on the applicants of a microfinance institution (MFI) and exploit the natural experiment of a regulatory change imposing a strict EUR 10,000 loan ceiling on microcredit. Descriptive statistics indicate that the presence of the ceiling is associated both with bank-MFI co-financing and with harsher treatment of female borrowers. To investigate causal links, the authors develop an econometric approach that addresses the concerns of selection biases, multicollinearity, and endogeneity. Their empirical findings suggest that the change in the MFI’s gender-related attitude was triggered by banks through co-financing. Hence, they speculate that co-financing pushes ceiling-constrained MFIs to import whatever biases in loan granting that the banks are prone to. Overall, this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women’s empowerment efforts made by MFIs.

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