Do Women Pay More for Credit? Evidence from Italy

This paper uses a large data set on overdraft contracts between banks and microfirms and self-employed individuals, to demonstrate that women in Italy pay more for overdraft facilities than men. The male/female differential is observed even after controlling for a large number of characteristics of the type of business, borrower and structure of the credit market. Study results indicate that:

• Women are not riskier than men;
• Banks charge different rates to male and female borrowers;
• In places with higher social capital and trust, banks charge lower interest rates, but women benefit less;
• Men are charged higher rates of interest if they post a guarantor;
• Women are charged less if they post a male guarantor, but more if they post a female guarantor.

Study results indicate a certain amount of taste-based discrimination by banks. The study, therefore, demonstrates that women in Italy do pay more than men for overdraft facilities, and this difference does not seem to be explained by any variable capturing differential risk.