Finance and Development
Paper Session
Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)
- Chair: Martin Kanz, World Bank
Credit Contracts, Business Development, and Gender: Evidence from Uganda
Abstract
We examine how addressing liquidity shortages at different points in the loan cycle affects small firm growth and varies by entrepreneurs' gender. Providing liquidity—upfront for larger initial investments, early on for managing costs and repayments when returns are delayed, and throughout to mitigate unforeseen financial shocks—can improve business outcomes, but factors such as the diversion of funds due to sharing pressures may restrict effective liquidity management. In our field experiment, entrepreneurs borrowing from a major Ugandan lender were randomly assigned different repayment plans, which varied the timing of liquidity available to them. Results indicate that liquidity available throughout the loan cycle yields higher profits after five years, with the optimal timing depending on the entrepreneur's gender. By contrast, upfront liquidity does not affect firm outcomes. Our analysis reveals that male-owned businesses increase hiring and generate higher profit when liquidity is available throughout the loan cycle, while female-owned businesses benefit more from early liquidity provision. We present suggestive evidence that these differences are driven by kinship taxation on female entrepreneurs.Discrimination Expectations in the Credit Market: Survey Evidence from India
Abstract
Individuals belonging to ethnic or cultural minorities often have more limited and costlier access to credit than the general population. Such discrimination is typically thought to be the result of taste-based or statistical discrimination on the part of financial institutions. We present survey evidence from India to explore an additional demand side explanation for limited credit access among minority populations: differences in the propensity to apply for credit driven by expectations of discrimination in the loan application process. We compare expectations of credit market discrimination against actual approval rates observed in credit bureau data, benchmark expectations of discrimination based on caste and religion against expectations of gender-based discrimination and explore to what extent individuals update in response to verifiable information about loan approval rates.Discussant(s)
Simone Gabrielle Schaner
,
University of Southern California
Anna Vitali
,
New York University
Janis Skrastins
,
Washington University-St. Louis
JEL Classifications
- O1 - Economic Development
- G2 - Financial Institutions and Services