Bridging the gap between migrants and the banking system

Giorgio Albareto () and Paolo Emilio Mistrulli

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we address two related issues. First, we test whether micro firms run by migrants pay more for credit than firms run by native entrepreneurs. Second, we verify whether the differences in the cost of credit between these two groups of entrepreneurs decrease as long as the informational and cultural gap narrow. To this aim we employ a large and unique data set providing us with detailed information about each overdraft loan granted by banks to sole proprietorships based in Italy. We find that firms run by migrants pay, on average, almost 70 basis points more for credit than those run by entrepreneurs born in Italy. The interest rate differential is lower for entrepreneurs born in Italy whose parents were natives of other countries (“second generation” migrants) and, among those born abroad, for migrants whose parents were natives of Italy (“Italian migrants”). These results suggest that cultural differences may matter for the functioning of the credit market. A lengthening in credit history may help migrants to “bridge the gap”. We find that, on average, interest rates lower with the length of the credit history. Furthermore, and more importantly from the paper perspective, firms run by migrants benefit more from a repeated interaction with the banking system. Finally, we find that the size of the migrant community and the improvements in bank ability to deal with cultural diversity both contribute to narrow the interest rate differential between migrant and Italian entrepreneurs.

Keywords: credit; financial integration; migration (search for similar items in EconPapers)
JEL-codes: G21 Z10 (search for similar items in EconPapers)
Date: 2010-10-05
New Economics Papers: this item is included in nep-ban, nep-ent and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Bridging the gap between migrants and the banking system (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26476

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