Demand for Microcredit by Indonesian women

Abstract

The poverty alleviating benefits of gender-targeted microcredit programs has successfully been demonstrated in South Asia. In this paper, we examine the demand for credit by Indonesian women, in the absence of such a targeted microcredit program. We argue that when credit markets are imperfect and there are informational asymmetries, it is important to take into account the possibility that individuals may have no knowledge of or be unwilling to borrow due to constraints. Our results show that selection bias cannot be neglected, and ignoring double-selection may lead to an underestimation of loan demand by nearly one hundred percent. We find that given knowledge of credit facilities, women in female-headed households, and better networked women are more likely to borrow.