Discrimination by microcredit officers: Theory and evidence on disability in Uganda

Marc Labie, Pierre-Guillaume Méon, Roy Mersland and Ariane Szafarz

EconStor Open Access Articles and Book Chapters, 2015, vol. 58, 44-55

Abstract: This paper studies the relationship between a microfinance institution (MFI) and its loan officers when officers discriminate against a particular group of micro-entrepreneurs. Using survey data from Uganda, we provide evidence that loan officers are more biased than other employees against disabled micro-entrepreneurs. In line with the evidence, we build an agency model of a non-profit MFI and a biased loan officer in charge of granting loans. Since incentive schemes are costly and the MFI's budget is limited, the MFI faces a trade-off between combating discrimination and granting loans. We show that the optimal incentive premium is a non-decreasing function of the MFI's budget. Moreover, even a non-discriminatory welfare-maximizing MFI may let its loan officer discriminate, because eradicating discrimination would come at the cost of too many loans. Observing an MFI's loan allocation biased against a minority group therefore does not imply that the institution is biased against this group.

Date: 2015
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https://www.econstor.eu/bitstream/10419/324012/3/D ... -officers-Uganda.pdf (application/pdf)

Related works:
Journal Article: Discrimination by microcredit officers: Theory and evidence on disability in Uganda (2015)
Working Paper: Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda (2015)
Working Paper: Discrimination by Microcredit Officers:Theory and Evidence on Disability in Uganda (2011)
Working Paper: Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:324012

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