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Women Are Better Credit Than Men


    If you were a moneylender, would you rather lend to a man or a woman?

    If we use the number of borrowers as an indication, it would seem that male borrowers are preferred. Interestingly, there are a number of studies that point to women as better borrowers than their male counterparts.

    Nobel Laureate Muhammad Yunus prefers to lend to women. This Bangladeshi professor-turned-banker and known as the Father of Microfinance founded the Grameen Bank and his work has become the model in many poverty alleviations and credit accessibility projects all over the world.

    Here are some interesting findings that also reflect the situation in other countries.

    1. Women are better at paying their loans.

    According to Katherine Esty, author of Twenty-Seven Dollars and a Dream (How Muhammad Yunus Changed the World and What It Cost Him), commercial banks in Bangladesh, where middle-class men are the primary borrowers, have repayment rates of 70%. Compare that to the women borrowers at Grameen Bank in the same country which is a high 97%!

    According to Komida, a cooperative based in Jakarta, Indonesia with 153 branches and 370,000 borrowers, all females, they regularly see their borrowers pay back their loans on time with an almost perfect repayment rate of 99.7%!

    In the Philippines, Senator Francis Pangilinan cited experience from the micro-finance sector, which shows a high repayment rate of 99.44% for CARD-MRI (Center for Agriculture and Rural Development - Mutually Reinforcing Institutions). This program targets the landless nanays (mothers) in communities. They were first offered micro-loans for small-scale livelihood activities, education, health, and agriculture. After several years of training and educating these women on how to manage their loans, they have evolved into businesswomen who are now in need of formal banking system.

    2. Where do women use their loan proceeds?

    It is observed that when women borrow money, they use it to help improve the family condition over time, instead of squandering it away on snacks or luxuries as observed among a number of male borrowers. This could also be because it is easier to take a loan if you’re a man. On the other hand, a loan taken up by a woman has to go through more scrutiny, consequently, resulting in better loan usage, which is usually for poverty alleviation.

    In the Philippines, the main purpose of borrowing money based on the National Baseline Survey On Financial Inclusion by Bangko Sentral ng Pilipinas is as follows:

    Food = 59.5%

    School-related expenses = 38.0%

    Emergencies = 32.7%

    (Note: Respondents were allowed to give more than one answer in this 2015 survey)

    3. Women are not confident when it comes to borrowing money.

    Women, in general, have a lower appetite for borrowing money. Moreover, they are more easily dissuaded from taking a loan. If they see one requirement not being fulfilled, they easily step back compared to their male counterpart. Inasmuch as this may be a contributing factor to the lower borrowing rate among women, there is also a positive side to this. They are more prudent in borrowing. And so, when they take on a loan, they tend to be more serious about fulfilling its terms and conditions.

    4. Women have a stronger urge to be good borrowers.

    The fear and shame that go with non-payment of loan on time is stronger among women. Due to their more emotional nature, they tend to care more about what others would say about their past dues, and the effect this would ultimately have on their family reputation.

    5. Women are more conservative in investing.

    Since women are more cautious and not as overconfident as their male counterparts in investing, their decisions are more conservative and the likelihood of not having the cash flow to repay loans is lower.

    6. Women socialization helps improve their creditworthiness.

    According to Thierry Sanders, CEO of Mekar, a peer-to-peer lending platform in Indonesia, the weekly meetings of borrowers and loan officers are attended mostly by women. The male borrowers would only attend for the first few months because they found it hard to continue the practice due to their main work activities. On the other hand, women are more likely to sustain their attendance because they see these meetings as an opportunity to go out of their homes and have a little social time for themselves. In these meetings, the loan officers and female borrowers are able to update each other on a regular basis and address any brewing problem before it worsens.

    These are interesting findings that should encourage lending institutions to direct their attention to women. For all poverty alleviation efforts, we should remember that 70% of the world's poor are women, the gender who has been disadvantaged in terms of credit and other financial services. And you know what, when you improve the condition of women, you improve the condition of the world! For indeed, the hands that rock the cradle have a great impact on society!



    Statistics cited in the article were derived from the following:

    5 Reasons Why Muhammad Yunus Focuses on Lending to Women (Impatient Optimists)

    Online financing of women’s businesses in Indonesia (Medium)

    Empowering women in agriculture (Office of Senator Kiko Pangilinan)

    National Baseline Survey on Financial Inclusion (Bangko Sentral ng Pilipinas)


    Rose Fres Fausto is FQ Mom (FQ stands for Financial Intelligence Quotient). She was an investment banker turned full-time homemaker and now a writer and speaker on money and family. She’s a Gallup Certified Strengths Coach and Behavioral Economist, having trained under Dan Ariely, the Father of B.E. Richard Thaler, and recently completed a B.E. course at the Harvard Business School. She wrote bestsellers Raising Pinoy Boys, The Retelling of The Richest Man in Babylon (English and Filipino versions), FQ: The nth Intelligence. She has a weekly column in PhilStar.com and regularly contributes to other magazines. 

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    AUTHOR BIO Rose Fres Fausto is FQ Mom. FQ stands for Financial Intelligence Quotient. Investment banker turned full-time homemaker, she is now a writer and speaker on money and family.

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