Gender gap and local economic diversity in microfinance: Evidence from the microcredit program in Brazil

The objective of the paper is to measure the gender gap in microcredit programs, considering the dynamics of the local economy and the labor market. We used data from the CrediBahia program in the State of Bahia, Brazil, to carry out the research. The literature indicates that the default rate for female borrowers is lower than that of male peers, even considering the difficulty for women to access the traditional credit market. In this context, the research contributes to the literature by including the effects of local and labor market characteristics on the ability to pay by women. We applied logistic models, Propensity score matching (PSM), and Instrumental variable estimation to test the existence of a gender gap among borrowers in the Brazilian microcredit program. The marginal effect shows that the probability of default for female borrowers was 21.5% lower than for males. Expected profits for female borrowers were 30.8% higher than the sample mean. The female borrowers were associated with an expected loss 18.6% lower than the sample mean and the repayment ratio was 1.7% higher than the sample mean. The default rate is also lower for older and married women. The marginal effect shows that the probability of default for married female borrowers was 7.6% lower than for a single female and 26.8% lower than for men. Each additional year for the woman, the probability of default of the female borrowers was 0.5% lower than for the men. In addition, the dynamics of the local economy contribute to women's loan performance. Thus, the results suggest that lending to women is more profitable and less risky.