Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda

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

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

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.

Keywords: Disability; Discrimination; Incentives; Loan officers; Micro-entrepreneurs; Microcredit (search for similar items in EconPapers)
Date: 2015
Note: SCOPUS: ar.j
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Published in: The Quarterly review of economics and finance (2015) v.58,p.44-55

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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 (2011)
Working Paper: Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ulb:ulbeco:2013/226217

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/226217

Access Statistics for this paper

More papers in ULB Institutional Repository from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().