Gender gap and regional economic diversity in microfinance: evidence from the microcredit program of the state of Bahia

Abstract

The objective of the paper is to measure the gender gap in the microcredit program of the State of Bahia (CrediBahia), considering the regional dynamics of the economy and labor market. The literature presents few studies that measure the effects of regional characteristics on the ability to pay. In addition, some studies indicates that the default rate for female borrowers is lower than male peers. However, women have difficulty in access to finance in the traditional credit market. In our research we have associated loan demand and business data with regional variables. Using data from Desenbahia, the financial manager of the microcredit program, we demonstrate that female borrowers are associated with a lower default probability and higher expected profit. We find that older and married women have a lower loan default rate and females in municipalities with more developed labor markets have a lower loan default rate more than male peers. Thus, our results indicate that the better regional dynamics of the economy and labor market contribute to decrease default in the program, mainly for the women, allowing to specify gender and regional payment conditions to improve the program.