Credit Officers and Loan Granting in Microfinance : Brazilian Evidence

In microcredit institutions, credit officers play a prominent role in loan granting decisions. Indeed, they collect field data, meet with the applicants, and provide personal recommendations to the credit committee that takes the final decisions (loan approval/denial, and loan size). This paper offers the first precise quantification of the degree of influence of the credit officers on the final decision making. Based on a detailed database from a Brazilian microcredit institution, we are able scrutinize the process that drives the determination of loan size within the institution. The partiality of the credit officers is analyzed through the lens of gender bias, providing a measure of the extent of the agency problem at stake. The results show that there is indeed a gender gap in loan size generated by the MFI, and that this gap is almost exclusively attributable the credit officers. In conclusion, this paper confirms that, despite monitoring, the credit officers remain by far the dominant decision-makers in microloan granting