A Comparison of Borrowing and Default Behaviour Between Men and Women

Abstract

Micro-credit started out as an intervention designed to address credit scarcity of women, purportedly because women are disenfranchised from property rights and adhere to repayment norms. Men, in contrast, were known for misusing the loans and defaulting on them. This paper, based on a sample of 490 men and 349 women drawn from four districts in erstwhile Andhra Pradesh, compares the borrowing and default drivers of men and women using systematic sampling techniques and rigorous statistical tests. Results show women’s disenfranchisement from family income and property, and hence their dependence on SHG membership for borrowing. Furthermore, men borrow from banks and planned repayments even in conditions of distress, where both genders are cost rationed. The findings also point to men co-opting with women for financing agriculture. A comparison of default drivers points to debt traps and lower or inadequate income driving defaults and underscores the asymmetry of information and asymmetry of power between lender–principals and borrower–agents, where the principals have an advantage over the agents in both the cases ( Saam, 2007 ). The paper, therefore, questions the blanket assumptions of compliant repayments by women and wilful defaults by men. JEL codes: D63, D82, J16, Z13, C51