Loan methodology, gender, environment and the formation of capital by Mexican microfinance institutions

Although evidence from literature in social psychology, sociology, the economics of gender, and business administration generally states that men are more successful than women as business owners and employees, the development literature suggests that women may be more successful than men in microfinance programs. This may be due to higher levels of peer-group pressure, community pressure, group participation and solidarity in microfinance groups with a greater proportion of females. Group loans may also have more success in rural areas where society is more closely knit. In order to test these assumptions a survey was conducted in two microfinance institutions operating in central Mexico consisting of 109 individual loans, 182 small groups and 110 large groups. The survey was analysed with t-tests, ANOVAs and structural equation modeling. Surprisingly, no significant difference was found between the financial capital creation of males and females with individual loans, nor between groups with a greater proportion of females and groups with a greater proportion of males. This suggests that the gender gap in this context does not appear to be as wide as the literature would indicate. Males appear to enjoy few advantages in this context. Groups with a greater proportion of females appear to impose more sanctions from within the group, although there are not significantly more community sanctions imposed on these groups nor do these groups place more emphasis on group and community relations. Rural groups, however, did create significantly more financial capital than urban groups. An important by-product of this study was the finding that sanctions do not improve repayment rates but in fact have a negative affect on repayments rates, whereas, social relations within the group and the community have a significant positive affect on repayment rates. Furthermore, the sample of small groups found that high repayment rates significantly raise the creation of financial capital by microfinance clients.