Caste-Based Discrimination, Microfinance Credit Scores, and Microfinance Loan Approvals Among Females in India. Issue 2 (February 2022)

• Record Type: Journal Article
• Authors: Patel, Pankaj C.; Lenka, Sambit; Parida, Vinit
• Is Part Of: Business and society. Volume 61:Issue 2(2022)
• Page Start: 372
• Page End: 388
• Publication Date: 2022-02
• Subjects: adverse selection -- caste -- credit score -- microfinance; Industries -- Social aspects -- Periodicals; Industrial sociology -- Periodicals; Business ethics -- Periodicals; 306.3
• DOI: 10.1177/0007650320982609
• Languages: English
• ISSNs: 0007-6503

Abstract

We draw on the phenomenon of caste-based discrimination in India and signaling theory to assess whether microfinance credit scores improve the odds of female micropreneurs from a lower caste receiving loans and whether visible business characteristics further improve the odds of receiving microfinance loans. In a sample of 3, 144 female microfinance loan applicants at a female-focused microloan enterprise in India, females from a lower caste, relative to those from a higher caste, have lower odds of receiving loans when their credit scores are below the mean. However, when females from a lower caste have credit scores higher than the mean, the odds of receiving a loan increase. The practical effect of size is small but meaningful. Loan applicants from a lower caste with a visible signal of business ability do not improve their chances of receiving a loan relative to those from a higher caste.