Discrimination in Microfinance: The Role of Credit Officers

Marc Labie (), Pierre-Guillaume Méon and Ariane Szafarz

No 09-017.RS, Working Papers CEB from Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB)

Abstract: This paper studies how high-powered incentives may affect credit officers’ discriminatory practices in microfinance institutions. Using an agency model applied to a non-profit MFI, we argue that incentive contracts may help align the officer’s behavior with the MFI’s mission. However, since incentives are costly, and the MFI’s budget is limited, even a benevolent institution faces a trade-off between fighting discrimination and raising outreach. Welfare maximization may not imply full eradication of discriminatory practices. A non discriminating welfare-maximizing MFI may thus prefer paying smaller incentives, and letting its credit officer discriminate to some extent.

Keywords: Microfinance; Discrimination; Credit Officers; Incentives. (search for similar items in EconPapers)
JEL-codes: O16 D82 J33 L31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-dev and nep-mfd
Date: 2009-04

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http://www.solvay.edu/EN/Research/Bernheim/documents/wp09017.pdf First version, 2009 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:sol:wpaper:09-017

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