Explaining the Gender Gap Dilemma in Microfinance

Abstract

In this paper, we address main entrepreneurship puzzles prevailing in microfinance literature. The literature has shown that it is much more difficult to improve business outcomes for female entrepreneurs than for their male counterparts. This paper provides new empirical evidence to characterize the so-called microfinance gender gap. We present evidence on the relation of female ownership with women empowerment, the allocation of resources, and intrahousehold decision patterns. Likewise, we analyze their relation with microenterprise performance, profits. By using data of the microcredit programme ProMujer in Bolivia we find that female microenterprise ownership is positively related to women empowerment, which at the same time has a negative relation with profits. We also find that one of the mechanisms through which female microenterprises are related negatively with business profits is the absence of coordination and cooperation in the intrahousehold decision making process. We also find that women are positively related with the misallocation of resources, and having through this mechanism negative effects on profits. Through the paper we highlight the positive effect of women education level on profit levels, on cooperative intrahousehold behaviors and on the efficient allocation of resources.