Female Access to Credit in France: How Microfinance Institutions Import Disparate Treatment from Banks

This paper presents the results of a comparative study undertaken to observe the patterns in loans granted to male and female entrepreneurs by a French MFI. The sample period of observation was split in two: before and after the MFI implemented the French EUR 10,000 regulatory loan-size ceiling. In the first period, the MFI does not co-finance projects with mainstream banks and loan size is gender-insensitive. In the second period, the MFI does co-finance above-ceiling projects with mainstream banks. Key findings include:

• Female microborrowers are harmed by the loan-size ceiling imposed on licensed MFIs by the French regulator;
• When loan-size ceilings are low, it leads to the development of co-financing schemes between MFIs and mainstream banks. In turn, the MFIs are bound to import whatever biases in loan granting the banks are prone to;
• Ruling out co-financing while maintaining a very low loan-size ceiling could compromise the sustainability of the microfinance industry, especially if subsidies dry up;
• Imposing on MFIs a loan-size ceiling that is too low to meet the needs of microbusinesses is counterproductive.