Male Borrowers Research Articles

What are the determinants of the financial and social performance of MFIs in Togo? Does gender borrower matter on financial performance?

Using the panel generalized method of moments, we scrutinize the key factors of financial and social performance of Microfinance institutions (MFIs) in Togo. We report that a higher increase in equity leads to MFIs' financial sustainability while an increase in debt leads to unsustainability. Furthermore, the increase in staff expenditure and operational efficiency decreases financial performance. Interestingly, in the context of Togo, the percentage of male borrowers contributes more strongly to the profitability and sustainability of MFIs than female borrowers. However, in terms of loan repayment, female borrowers contribute more to the sustainability of MFIs than male borrowers

Impact of Women Borrowers Culture on the Financial Efficiency of Microfinance Institutions in ASEAN-4 Countries

This paper examines the impact of women borrowers' culture on the financial efficiency of microfinance institutions (MFIs) between the years 2011 to 2019. The sample data consisted of 90 MFIs from ASEAN-4 countries. As the first stage analysis, data envelopment analysis (DEA) was employed to determine the score of financial efficiency for the MFIs. In the second stage, Multivariate Panel Regression Analysis were used to examine the impact of women borrower on the level of financial efficiency of the MFIs. The findings reveal that Cambodia has the highest financial efficiency score in ASEAN 4. This indicates that the MFIs in Cambodia are sustainable in providing financial services to the poor in the long run. Moreover, the findings also found a positive relationship between women borrowers culture and the efficiency of the MFIs, which implies that women borrowers reduce the risk of default, thus confirming that women have better loan repayment rates than male borrowers. The outputs from this study provide new insights for the stakeholder of the MFIs as well as policymakers to develop a strategy in order to promote the continuous development of the MFIs.

Effect of gender participation on determining the maturity of crossed-due loans: Evidence from microfinance companies of Nepal

The impact of gender participation on the maturity of crossed-due loans is observed in this study. Furthermore, the associations between maturity of crossed-due loans, their number, and loan issued on physical collateral and collective bail are also monitored using the unbalanced panel data of thirty microfinance companies. The study investigates the short- and long-term link between response and predictor variables. It is founded on an exploratory and descriptive research design. The Hausman test, fixed effect or LSDV model, Pedroni and Kao co-integration test are used to observe the relation and impact. The maturity crossed due loan number, total loan amount, loan issued against physical collateral, and loan allocated on collective bail are jointly significant to determine the maturity of crossed due loan amount of microfinance companies of Nepal. It is found that women are more conscientious in repaying loans on time compared to male borrowers. Per rupee 0.382 rupees, a maturity crossed due loan is found in microfinance companies where only women can borrow, but per rupee 0.404 rupees, a time crossed due loan is found where men and women can borrow. Policymakers of banks are not necessarily hesitant to provide loans to female borrowers.

Kinship, gender and social links impact on micro group lending defaults

AbstractJoint liability aspires to improve micro‐loan performance through the support of, and pressure from, the group borrowers. This paper examines how the group composition, in terms of the mixture of kinship (Family) ties and social (Friends and Neighbours) ties among the borrowers, affects the default rates. Using binary logistics regression and three machine learning models, responses from 507 group micro‐loan borrowers from four major Moroccan cities were analysed. The results show that the stronger the family and kinship ties are within a loan group, the higher is the default rate. On the contrary, the stronger the social ties are among the group, the lower is the default rate. Other key findings include that the diversion of fund usage from investment to consumption is not found to significantly cause default. Also, loan default can be a consequence of borrowers' strategic choice rather than financial distress. As compared to the female members, male borrowers are found to be causing higher default rates. Interestingly, the gender‐related default rates are lower when more of the male borrowers are only socially related. Finally, group size is found to be positively associated with default. Our findings can help micro‐finance institutions refine their lending policies and guidance on groups' composition and size to reduce default rates.

Accessibility to consumer credit by individual customers in financial companies: A case in the Mekong Delta

Consumer credit has grown rapidly in recent years with a variety of products from banks and financial companies. However, previous studies in Vietnam only approached factors affecting consumer lending decisions and credit access at commercial banks. The aim of this study is to determine the factors affecting the accessibility of consumer loans to individual customers at financial companies in the Mekong Delta. Data were collected by directly interviewing 200 people who applied for loans at financial companies (not banks). A pre-designed questionnaire and a random sampling method were used. According to the analysis results of the binary Logit regression model, male borrowers will have more difficulty in accessing consumer credit at financial companies. This result is in contrast to the results shown in some studies conducted at commercial banks. On the other hand, the positive impact on individuals' access to consumer loans of the variables of education level, income, and form of receiving income reinforces the results of previous studies on this topic. Besides, the higher the loan amount, the lower the probability of loan approval. From there, the author has proposed recommendations to improve access to consumer loans at financial companies and improve consumer credit products in the Mekong Delta.

Does Corruption Discourage More Female Entrepreneurs from Applying for Credit?

There is evidence of a gender gap in access to finance. In this paper, we test the hypothesis that corruption discourages more female than male entrepreneurs from applying for credit. We use data on access to credit and corruption at the firm level for a large dataset of firms from 68 countries worldwide. We demonstrate that female entrepreneurs are more discouraged by corruption to ask for credit than male borrowers. We find evidence for two explanations for the gendered impact of corruption on borrower discouragement: women have less experience in management than men and as such can have less experience to deal with corruption, and gender inequality in society enhances the discouragement of female borrowers. Thus, our findings provide evidence that corruption enhances the gender gap in access to finance, enhancing gender inequality in participation in economic activity.

Uncovering The Source of Machine Bias

We develop a structural econometric model to capture the decision dynamics of human evaluators on an online micro-lending platform, and estimate the model parameters using a real-world dataset. We find two types of biases in gender, preference-based bias and belief-based bias, are present in human evaluators' decisions. Both types of biases are in favor of female applicants. Through counterfactual simulations, we quantify the effect of gender bias on loan granting outcomes and the welfare of the company and the borrowers. Our results imply that both the existence of the preference-based bias and that of the belief-based bias reduce the company's profits. When the preference-based bias is removed, the company earns more profits. When the belief-based bias is removed, the company's profits also increase. Both increases result from raising the approval probability for borrowers, especially male borrowers, who eventually pay back loans. For borrowers, the elimination of either bias decreases the gender gap of the true positive rates in the credit risk evaluation. We also train machine learning algorithms on both the real-world data and the data from the counterfactual simulations. We compare the decisions made by those algorithms to see how evaluators' biases are inherited by the algorithms and reflected in machine-based decisions. We find that machine learning algorithms can mitigate both the preference-based bias and the belief-based bias.

Decomposing Gender Differences in Bankcard Credit Limits

<ns3:p>In this paper, we examine if there are gender differences in total bankcard limits by utilizing a data set that links mortgage applicant information with individual-level credit bureau data from 2006 to 2016. We document that after controlling for credit score, income, and demographic characteristics, male borrowers on average have higher total bankcard limits than female borrowers. Using a standard Kitagawa-Oaxaca-Blinder decomposition, we find that 87 percent of the gap is explained by differences in the effect of observed characteristics between male and female borrowers, while approximately 10 percent of the difference can be explained by differences in the levels of observed characteristics. Using a quantile decomposition strategy to analyze the gender gap along the entire bankcard credit limit distribution, we show that gender differences in bankcard limits favor female borrowers at smaller limits and favor male borrowers at larger limits. The primary factors that drive this gap have changed over time and vary across the distribution of credit limits.</ns3:p>

Economic Consequences and the Motive to Discriminate

Past research indicates that increasing the economic consequences of evaluations should theoretically discourage discrimination by making it more costly. I theorize that such consequences may also encourage discrimination in settings in which evaluators may be motivated by performance expectations, e.g., stereotypes. I explore this theory using data from an online lending platform whose loan guarantee policy reduced the potential economic consequences of using borrowers’ demographics during lending decisions. I find evidence that with the policy in place, lenders evaluated female borrowers less favorably than male borrowers. This finding is consistent with the theory that the policy discouraged performance-motivated discrimination (that driven by beliefs about performance abilities) and simultaneously encouraged consumption-motivated discrimination (that driven by a like or dislike of others because of their demographic traits). Because I theorize about underlying motives for discrimination, the insights developed here should apply to a wide range of types of discrimination that vary according to these motives, including classic taste-based discrimination, homophily-driven discrimination, statistical discrimination, and status-based discrimination. Economic consequences may therefore represent an important dynamic link between different types of discrimination.

Model Risk in Risk Analysis for No-Negative-Equity-Guarantees

Understanding the risk for No-Negative-Equity-Guarantees (NNEGs) requires the proper modeling of the housing return, interest rate, and mortality rate dynamics. This article investigates the model risk for the risk measures of NNEGs by calculating the Value-at-Risk (VaR) and Conditional-Tail-Expectation (CTE) from the provider perspective, with an emphasis on the housing price return model. Therefore, we propose a jump ARMA-GARCH model, according to nationwide house price return data in the UK. Interest rate and mortality rate dynamics are assumed to follow the CIR model (Cox et al. 1985) and the CBD model (Cairns et al. 2006) respectively. Our numerical analyses reveal that the housing price risk, interest-rate risk, and longevity risk can affect the VaR and CTE of NNEGs, with the impact being as significant as that for housing risk. The VaR and CTE of NNEGs will be greater for female borrowers than for male borrowers, essentially because females have a longer life expectancy. The proposed framework can help financial institutions manage the major three risk factors for NNEGs and assist in meeting the regulator’s concerns. TOPICS:Quantitative methods, real estate, VAR and use of alternative risk measures of trading risk Key Findings ▪ We investigate model risk in risk analysis for No-Negative-Equity-Guarantees. ▪ Our numerical analyses reveal that the housing price risk, interest-rate risk, and longevity risk can affect the VaR and CTE of NNEGs, with the impact being as significant as that for housing risk.

Shaming Microloan Delinquents: Evidence from a Field Experiment in China

We study the effects of village credit information sharing on individual microloan repayment, using a randomized experiment with loan applicants from 40 villages in rural China. In our main treatment, customers received a message on the loan application form that “overdue payment (40 days after each installment due date) will be considered for public disclosure among the village by showing debtors’ names on a blackboard outside the village office of the microlending institution.” On average, this social appeal reduces the share of delinquents and the individual delinquency rate by 18.6% and 5.6% from baseline rates of 79.5% and 15.2%, respectively. The effects appear more pronounced among male and older borrowers. Additional treatments help to benchmark the effect against lender credit information sharing and separate the effects on adverse selection and moral hazard. Mechanism analysis shows that the publicly disclosed “blacklist” of delinquents affects borrowers’ repayment behaviors, partially through borrowers’ fear of losing informal risk insurance from the village society, and predominately through public shaming penalties. Overall, these results support that, in traditional societies, social appeals can provide not only pecuniary, but also psychological incentives to improve loan repayment. Psychological incentives, to some extent, have stronger effects.

Microfinance and poverty reduction: New evidence from Pakistan

AbstractMicrofinance is key to reducing poverty in Pakistan. While comprehensive finance is frequently considered as, it creates inclusive growth and poverty reduction in poor communities, and can be boosted by ease of finance. However, when the poor people are involved in the broader scale (different types of poverty level), can this microfinance work? We used an econometric model to test the symmetry approaches of the comprehensive financial organizations and the poor in poverty reduction activities to find the answers. Keeping this in view, we studied different determinants related borrowers for the poverty reduction with respect to access to Micro finance institutes (MFI) and productive loan. Despite some limitations, such as those arising from potential unobservable important determinants of access to MFIs, significant positive effect of MFI productive loans has been confirmed. The significance of “treatment effect” of coefficients has been verified by probit model. In addition, we found that loans for productive purposes were more important for poverty reduction by MFB (Microfinance banks) than MFI. However, in urban areas, simple access to MFIs has larger average poverty‐reducing effects than the access to loans from MFIs for productive purposes. This leads to exploring service delivery opportunities that provide an additional avenue to monitor the usage of loans to enhance the outreach. Therefore, the results showed by probit model that access to MFI was better in urban areas and male borrowers thus achieved more loan. Therefore, it is suggested that for the poverty reduction, there is a dire need to improve and localize the Microfinance institutions in rural areas as well as to promote group lending methodology to avoid risk of getting loans and increase the number of both male and female savers. Thus, the saving value will be increased and side by side interest rate will be significantly achieved. Hence, it is concluded that the goal of providing sustainable financial services implicitly implies that MFIs provide financial services to the poor, whenever they find it profitable to do so. The removal of subsidy and the absence of interest rate restrictions could make the market for the poor become even worse as the market occupiers may act in their own interest. The powerful push will be needed from national economic and social impacts for the increasing support for microfinance.

Malaysian residential mortgage loan default: a micro-level analysis

PurposeThis study investigates factors contributing to residential mortgage loans default by utilizing a unique dataset of borrowers' default data from one of the pioneer lending institutions in Malaysia that provides home financing to the public. Studies on mortgage loan default have been extensively examined, but limited studies utilize the individual borrower's data, as financial institutions generally hesitant to reveal their customers' data due to confidentiality issue.Design/methodology/approachThis study uses logistic regression model to analyze 47,158 housing loan borrowers' data for the year 2016.FindingsThe findings suggest that male borrowers, Malay and other type of ethnicity, guarantor availability, loan original balance, loan tenure, loan interest rate and loan-to-value (LTV) ratio are the significant factors that influence mortgage loans default in Malaysia.Research limitations/implicationsFuture studies may expand the sample by employing data from other types of financial institutions that would give greater insights as findings might vary due to differences in objectives, functions and regulations. In addition, the findings are subjected to the censoring bias where future studies could perform the survival analysis to control for censoring bias and re-validating the findings of the present study.Practical implicationsThe findings provide valuable insights for lending institutions and the government to formulate housing loan policy in Malaysia.Originality/valueTo the best of the authors' knowledge, this is the first study in the context of emerging economies that uses financial institution's internal data to investigate factors of mortgage loan default.

Tit for Tat? The Consequence of Private Information Misuse in Debt Collection

We examine the consequences of an intrusive debt-collection tactic that targets delinquent borrowers’ social circles. Our identification strategy relies on the fact that some of the delinquent loans are not worked on due to collection agents’ excessive workload. We show that this tactic backfires and increases the borrowers’ default rate by 5.9 to 14.3 percentage points. Male borrowers and borrowers with better credit respond more strongly. Moreover, the effect is concentrated in the period when this collection practice was emerging and likely unexpected. These findings are consistent with the negative reciprocity interpretation: angered borrowers retaliate by defaulting on their loans.

Heterogeneity of farm loan packaging term decisions: a finite mixture approach

ABSTRACTThis article revisits the minority borrowers’ discrimination issue in farm lending by departing from traditional loan approval-rejection or default rate-based analytical models to focus on loan packaging decisions. This study analyses such decisions using a Finite Mixture Model that optimally separates the borrowers into two sub-classes allowing for a priori unspecified heterogeneity in borrowers’ data, which has not been accounted for in previous loan discrimination analyses. Results show that non-white farm borrowers tend to receive larger loans among those in the lower loan latent class, but receive relatively lower loans in the larger loans borrower category. These farmers are also charged higher interest rates vis-à-vis their peers in both the low and high interest rate latent classes. This study’s results also indicate that male borrowers are accommodated with larger loans and longer maturities in all loan amount and maturity latent classes. This study validates the interplay among significant trends in loan packaging terms for racial and gender minority borrowers that seems logical from the lenders’ credit risk management perspective.

Language and market inclusivity for women entrepreneurship: the case of microfinance

Inclusive markets are key to fostering female entrepreneurship, and the microfinance sector has recognized and acted on this. Existing research has studied how institutions and organizational factors facilitate the process by which microfinance and other financial intermediaries tackle gender-based financial exclusion. But while the role of cultural institutions has been recognized as important, little research has systematically integrated culture in the study of gender-based financial exclusion. We posit that language is a cultural institution that influences the extent to which financial intermediaries are successful in outreaching women and supporting female entrepreneurship. Inspired by a performativity approach, we develop a set of hypotheses that delineate how a specific feature of language, gender marking in grammar, moderates the role of institutional (state capacity) and organizational (NGO status and global ties) factors in shaping microfinance outreach to women. Using the ratio of female to male borrowers in 2361 microfinance organizations from 115 countries during the period 1995–2015, we confirm that market inclusion of women depends on organizational and institutional factors, and that gender marking in grammar influences those relationships.

Examining the Determinants of the Interest Rate of the Online Peer to Peer Loans in China

Peer to Peer (P2P) lending is a new business model. People lend money to borrowers through internet where they judge the borrowers by information provided by the website. This paper aims to find how age, gender, and location influence the interest rate of a P2P loan in China. By exploiting the unique data of Paipaidai, which is one of the largest P2P website in China, we find that borrowers from more developed area (in terms of GDP) need to pay higher interest rate to get a loan. Male borrowers need to pay higher interest rate to finance the loan. Young people need to pay higher interest rate in order to get their loan.

Children's schooling in Nicaragua: What is the link between educational achievement, borrowing, and gender?

AbstractThe impact of credit has been widely studied, and yet little is known about the effect of formal versus informal loans. In this paper, we contrast the two and their impact on children's schooling using longitudinal data from Nicaragua. To address endogeneity, we utilize both household fixed effects and locality–year fixed effects. Our results indicate that, on average, children from borrowing households fare worse than children from nonborrowing households, with male borrowers having a disproportionately negative effect on boys, and vice versa for girls and female borrowers. Informal credit is found to have a protective effect on school attendance, but the effects of formal and informal credit on cumulative schooling are found to be statistically equivalent. However, this appears to mask considerable heterogeneity within informal borrowing.

COLLATERAL REQUIREMENTS FOR SME LOANS: EMPIRICAL EVIDENCE FROM THE VISEGRAD COUNTRIES

The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (smes) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012–2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for smes. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

Gender discrimination in online peer-to-peer credit lending: evidence from a lending platform in China

Gender discrimination in accessing financial resources is a mounting concern in developing countries, but empirical evidence of such discrimination is limited. Using data collected from one of the largest peer-to-peer (P2P) lending platforms in China, we investigate potential gender discrimination in online P2P credit lending market in China. The results illustrate that female borrowers are more likely to be funded than male borrowers; but in exchange for higher funding success, female borrowers are found to pay higher interest rates. Moreover, the default rates of loans from female borrowers are significantly lower than those from male borrowers. Finally, we found that a borrower’s gender moderates the relationships between the borrower’ attributes and lending outcomes. The findings imply that profit-based statistical discrimination and costly taste-based discrimination co-exist in this online peer-to-peer lending market, but the underlying reasons for the discriminations are different. The implications for research and practice along with the limitations of this study are discussed accordingly.