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Bridging the gap between migrants and the banking system

Author

Listed:
  • Giorgio Albareto

    (Bank of Italy)

  • Paolo Mistrulli

    (Bank of Italy)

Abstract
In this paper, we test whether micro firms run by migrants pay more for credit than firms run by natives and whether the differences in the cost of credit for these two groups of entrepreneurs decrease as the informational and cultural gaps narrow. We employ a large and unique data set providing us with detailed information on each overdraft loan granted by banks to sole proprietorships based in Italy. We find that migrants pay, on average, almost 70 basis points more for credit than natives. The interest rate differential is lower for entrepreneurs born in Italy whose parents were natives of other countries (�second generation� migrants) and for migrants whose parents were natives of Italy (�Italian migrants�). These results suggest that cultural differences may matter for the functioning of the credit market. A lengthening of credit history reduces the interest rate differential between the two types of entrepreneurs. Finally, we find that both increases in the size of the migrant community and improvements in banks� ability to deal with cultural diversity help narrow the interest rate differential between migrant and Italian entrepreneurs.

Suggested Citation

  • Giorgio Albareto & Paolo Mistrulli, 2011. "Bridging the gap between migrants and the banking system," Temi di discussione (Economic working papers) 794, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_794_11
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    Cited by:

    1. Giulia Bettin & Andrea F. Presbitero & Nikola L. Spatafora, 2017. "Remittances and Vulnerability in Developing Countries," The World Bank Economic Review, World Bank, vol. 31(1), pages 1-23.
    2. Diaz-Serrano, Luis & Raya, Josep M., 2014. "Mortgages, immigrants and discrimination: An analysis of the interest rates in Spain," Regional Science and Urban Economics, Elsevier, vol. 45(C), pages 22-32.
    3. Leonel Prieto & Tagi Sagafi-nejad & Balaji Janamanchi, 2013. "A Bourdieusian Perspective on Acculturation: Mexican Immigrants in the United States," Administrative Sciences, MDPI, vol. 3(4), pages 1-16, December.
    4. Núria Rodríguez‐Planas, 2018. "Mortgage finance and culture," Journal of Regional Science, Wiley Blackwell, vol. 58(4), pages 786-821, September.
    5. Wadad Saad & Hassan Ayoub, 2019. "Remittances, Governance and Economic Growth: Empirical Evidence from MENA Region," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(8), pages 1-1, August.
    6. Lončarski, Igor & Marinč, Matej, 2020. "The political economy of relationship banking," Research in International Business and Finance, Elsevier, vol. 51(C).
    7. Teodora Cristina Barbu & Iustina Alina Boitan, 2018. "Immigrants’ impact on financial market – European countries’ evidence," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(1), pages 183-212.
    8. Andrew Van Hulten & Abdullahi D. Ahmed, 2013. "Migrant Entrepreneurs' Access To Business Finance In Australia," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-22.

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    More about this item

    Keywords

    migration; bank lending; interest rates;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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