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20101227 Discrimination by Microcredit Finance Officers in Uganda


20101227 Discrimination by Microcredit Finance Officers in Uganda

This paper studies the relationship between a microfinance institution (MFI) and its credit officers when the latter discriminate against a group of the target population. Using survey data from Uganda, the authors provide evidence that credit officers are more biased against disabled borrowers than other employees. In line with the evidence, they then build an agency model of a non-profit MFI and a discriminating credit officer. Since incentive schemes are costly and the MFI’s budget is limited, even a non-discriminating welfare-maximizing MFI may prefer paying smaller incentivizing compensation, and letting its credit officer discriminate to some extent.