Do rural banks help women’s microenterprises? [A case from Indonesia]
The low value and number of loans extended to women entrepreneurs in micro sectors is often associated with societal gender inequality. Previous studies have shown that in patriarchal societies, where gender bias against women is stronger, women tend not to apply for loans, relying instead on informal financial institutions. The extent to which gender stereotyping among loan officers contributes to this phenomenon has received little attention, with previous studies tending to look at gender and credit relations from the borrower’s perspective.
The aim of this research is to identify possible gender bias in lending markets and how it manifests in the banking sector, especially in rural banks. Rural banks in Indonesia have been mandated to support micro businesses; however, as small institutions, they have basic technology or tend to conduct manual assessments, increasing the subjectivity of loan application assessments. This research will look at the impact of gender stereotypes on loan applications and determine whether negative stereotypes tend to influence appraisals. Understanding loan officers’ gender biases might explain the differences in how analysts consider similar applications submitted by different genders. Lastly, this research will examine whether this bias tends to normalise when the credibility of the borrower increases.