Gender Issues in Microfinance and Repayment Performance: The Case of a Nicaraguan Microfinance Institution

Abstract

Conventional wisdom and increasing empirical evidence in microfinance hold that women are better risks than men. In the present work, a logit model controlling for a range of borrower and loan characteristics was carried out to assess the validity of this statement by comparing repayment rates. The study includes a sample of loans disbursed by a Nicaraguan microfinance institution during the years 2003-2004, a period characterized by high oil prices. A dichotomous dependent variable is created, taking the value of 1 if the credit turned out to be of the best quality i.e. an “A” credit by Nicaraguan regulations, and 0 otherwise. The dependent variable is regressed on variables summarizing the characteristics of the borrower and the loan to investigate the impact of gender on repayment performance. The results provide significant evidence that female client’s repayment performance is in fact better than that of male’s at the conventional levels of statistical significance. However, the results also show that the perceived difference in gender risk is lower than what popular wisdom would suggest when borrower characteristics and other exogenous economic variables are taken into account. With the present sample, we conclude that other characteristics of the borrower as well as changes in the economic environment can have a similar or larger impact on risk than gender when it comes to repayment performance.