Free Access

SELF-REPORTED EMOTIONAL DISTRESS AND CREDIT DISCOURAGEMENT: RACIAL DIFFERENCES AMONG INDIVIDUAL MICROENTREPRENEURS IN BRAZIL

https://orcid.org/0000-0002-2484-1942

African and African Diaspora Studies Department, The University of Texas at Austin, Gordon-White Building, 210 W 24th St, Austin, TX 78705, USA

E-mail Address: marcelopaixao@utexas.edu

Search for more papers by this author

and

IRENE ROSSETTO

https://orcid.org/0000-0002-5479-5422

Population Research Center, The University of Texas at Austin, Austin, TX, USA

E-mail Address: irenerossetto@austin.utexas.edu

Search for more papers by this author

https://doi.org/10.1142/S1084946724500031Cited by:0 (Source: Crossref)

Abstract

Research has shown that credit discouragement is one of the most significant barriers deterring small businesses from accessing credit. Although credit discouragement is often associated with diminished expectations for successfully obtaining credit, the underlying causes of this phenomenon have not been explored fully. Adapting Loury’s (2021) feedback effect theory to the credit market, this study provides insights into the effect of race and emotional distress on credit discouragement among individual microentrepreneurs (IMEs) in Brazil. Using survey data collected in Rio de Janeiro and Salvador, the study confirms that Black and Brown IMEs who reported emotional distress in bank branches had a greater credit discouragement rate than those who did not. We also confirmed Brazil’s pigmentocratic pattern of inequality, with higher discouragement among Black IMEs compared to Brown and White IMEs.

Keywords:

References

Agier, I and A Szafarz (2011). Subjectivity in credit allocation to micro-entrepreneurs: Evidence from Brazil. Small Business Economics, 41(1), 263–75, [https://doi.org/10.1007/s11187-012-9429-9]. Crossref, Google Scholar
Agoraki, M-E K, N Aslanidis and GP Kouretas (2022). U.S. banks’ lending, financial stability and text-based sentiment analysis. Journal of Economic Behavior and Organization, 197, 73–90, [https://doi.org/10.1016/j.jebo.2022.02.025]. Crossref, Google Scholar
Almeida, AC and C Young (2007). A cabeça do brasileiro. Editora Record. Google Scholar
Anastasiou, D, C Kallandranis and K Drakos (2022). Borrower discouragement prevalence for Eurozone SMEs: Investigating the impact of economic sentiment. Journal of Economic Behavior and Organization, 194, 161–71, [https://doi.org/10.1016/j.jebo.2021.12.022]. Crossref, Google Scholar
Andrade, JMS (2007). Satisfação dos clientes do Banco do Brasil no acesso às agência bancárias com portas giratórias [Undergraduate thesis, Universidade Federal do Rio Grande do Sul]. [lume.ufrgs.br/handle/10183/14080]. Google Scholar
Ang, JS (1991). Small business uniqueness and the theory of financial management. The Journal of Entrepreneurial Finance, 1(1), 11–13, [https://doi.org/10.57229/2373-1761.1108]. Crossref, Google Scholar
Asiedu, E, JA Freeman and A Nti-Addae (2012). Access to credit by small businesses: How relevant are race, ethnicity and gender? American Economic Review, 102(3), 532–37, [https://doi.org/10.1257/aer.102.3.532]. Crossref, Google Scholar
Banco Central do Brasil (2017). Panorama do crédito concedido a microempreendedores individuais (Série Cidadania Financeira: Estudos Sobre Educação, Proteção e Inclusão No. 4). [www.bcb.gov.br/nor/relincfin/serie_cidadania_financeira_4_credito_concedido_mei.pdf]. Google Scholar
Banco Central do Brasil (2021). Relatório de cidadania financeira. [www.bcb.gov.br/content/cidadaniafinanceira/documentos_cidadania/RIF/Relatorio_de_Cidadania_Financeira_2021.pdf]. Google Scholar
Bates, T, WD Bradford and WE Jackson (2018). Are minority-owned businesses underserved by financial markets? Evidence from the private-equity industry. Small Business Economics, 50(3), 445–61, [https://doi.org/10.1007/s11187-017-9879-1]. Crossref, Google Scholar
Belaisch, A (2003). Do Brazilian banks compete? [IMF Working Paper No. WP/03/113]. International Monetary Fund. [www.imf.org/external/pubs/ft/wp/2003/wp03113.pdf. Google Scholar
Bertrand, J, A Burietz and P-O Klein (2022). Relationship lending, A matter of trust? The role of general trust in banks. SSRN Electronic Journal. [https://doi.org/10.2139/ssrn.4056954]. Crossref, Google Scholar
Bertrand, J and P Mazza (2022). Borrowers’ discouragement and creditor information. International Review of Law and Economics, 72, 106098, [https://doi.org/10.1016/j.irle.2022.106098]. Crossref, Google Scholar
Brimmer, A (2014). Black is the American economy: Summary of selected research. A reconsideration of the economics of race. In A Different Vision: African American Economic Thought, Volume 1, 9–45. TD Boston (ed.). NY: Routledge; Taylor and Francis Group. Google Scholar
Brown, R, JM Liñares-Zegarra and JOS Wilson (2022). Innovation and borrower discouragement in SMEs. Small Business Economics, 59(4), 1489–517, [https://doi.org/10.1007/s11187-021-00587-1]. Crossref, Google Scholar
Brusky, B and JP Fortuna (2002). Entendendo a demanda para as microfinanças no Brasil: Um estudo qualitativo em duas cidades. Banco Nacional de Desenvolvimento Econômico e Social. Google Scholar
Caglayan, M and B Xu (2016). Sentiment volatility and bank lending behavior. International Review of Financial Analysis, 45, 107–20, [https://doi.org/10.1016/j.irfa.2016.03.009]. Crossref, Google Scholar
Calabrese, R, C Girardone and A Sclip (2021). Financial fragmentation and SMEs’ access to finance. Small Business Economics, 57(4), 2041–65, [https://doi.org/10.1007/s11187-020-00393-1]. Crossref, Google Scholar
Carvalho, F (2007). Sobre a preferência pela liquidez dos bancos. In Sistema Financeiro: Uma análise do setor bancário brasileiro, LF de Paula and JL Oreiro (eds.), 3–22. UK: Elvesier. Google Scholar
Cavalluzzo, K, L Cavalluzzo and J Wolken (2002). Competition, small business financing and discrimination: Evidence from a new survey. The Journal of Business, 75(4), 641–79, [https://doi.org/10.1086/341638]. Crossref, Google Scholar
Cavalluzzo, K and J Wolken (2005). Small business loan turndowns, personal wealth and discrimination. The Journal of Business, 78(6), 2153–78, [https://doi.org/10.1086/497045]. Crossref, Google Scholar
Chakravarty, S and M Xiang (2008). An analysis of discouraged small businesses: An international perspective. SSRN Electronic Journal. [https://doi.org/10.2139/ssrn.1106181]. Crossref, Google Scholar
Christensen, JL and DS Hain (2024, November 05). Scared away? Discouraged borrowers and capital market information. ISBE 2014 Conference papers, Manchester, United Kingdom, [https://vbn.aau.dk/en/publications/scared-away-discouraged-borrowers-and-capital-market-information]. Google Scholar
Circovoador (Director) (2009, November 12). Manifesto porta na cara—Flagrante na agência bancária. [Video] YouTube. [youtu.be/pNBoVlfg_Cs]. Google Scholar
Coleman, S (2002). Borrowing patterns for small firms: A comparison by race and ethnicity. The Journal of Entrepreneurial Finance, 7(3), 77–98, [https://doi.org/10.57229/2373-1761.1099]. Crossref, Google Scholar
Corseuil, CHL, MC Neri and G Ulyssea (2014). Uma análise exploratória dos efeitos da política de formalização dos Microempreendores Individuais [Texto Para Discussão No. 1939]. Instituto de Pesquisa Econômica Aplicada. [repositorio.ipea.gov.br/bitstream/11058/2937/1/TD_1939.pdf]. Google Scholar
Cowling, M and A Sclip (2022). Dynamic discouraged borrowers. British Journal of Management, 1467–8551.12666, [https://doi.org/10.1111/1467-8551.12666]. Google Scholar
Da Conceição, EB and PK Spink (2013). Which foot first: Diversity management and affirmative action in Brazilian business. Management International, 17, 25–36, [https://doi.org/10.7202/1015809ar]. Crossref, Google Scholar
De Amorim Braga, FJ, F De Souza Silvestre and UR Oliveira (2018). Analysis of individual micro-entrepreneur vision from the perspective of financial management. Brazilian Journal of Operations and Production Management, 15(2), 182–92, [https://doi.org/10.14488/BJOPM.2018.v15.n2.a2]. Crossref, Google Scholar
Dymski, GA (2005). Bancando a transformação: Financiando o desenvolvimento, superando a pobreza. In Brasil em Deesenvolvimento (1, 81–142), AC Castro, A Licha, HQ Pinto Jr and J Saboia (eds.). Civilização Brasileira. Google Scholar
Fastenbauer, JM (2015). Access to finance by entrepreneurs in the UK and Austria: Discouraged borrowers. Doctoral dissertation, University of London. [pure.royalholloway.ac.uk/ws/portalfiles/portal/24513712/Judith_Miriam_Fastenbauer_PhD_thesis.pdf]. Google Scholar
Federação Brasileira de Bancos (2023). Pesquisa Febraban de tecnologia bancária (No. 2). [cmsarquivos.febraban.org.br/Arquivos/documentos/PDF/Pesquisa%20Febraban%20de%20Tecnologia%20Banc%C3%A1ria%202023%20-%20Volume%202.pdf]. Google Scholar
Federação Brasileira de Bancos and Centro de Estudos das Relações de Trabalho e Desigualdades (2014, November 3). Censo da diversidade 2014. [portal.febraban.org.br/pagina/3100/86/pt-br/censo-diversidade]. Google Scholar
Ferrando, A and K Mulier (2022). The real effects of credit constraints: Evidence from discouraged borrowers. Journal of Corporate Finance, 73, 102171, [https://doi.org/10.1016/j.jcorpfin.2022.102171]. Crossref, Google Scholar
Figueiredo, A (2002). Novas elites de cor: Estudo sobre os profissionais liberais negros de Salvador. Annablume. Google Scholar
Fraser, S (2009). Is there ethnic discrimination in the UK market for small business credit? International Small Business Journal: Researching Entrepreneurship, 27(5), 583–607, [https://doi.org/10.1177/0266242609338756]. Crossref, Google Scholar
Freel, M, S Carter, S Tagg and C Mason (2012). The latent demand for bank debt: Characterizing “discouraged borrowers.” Small Business Economics, 38(4), 399–418, [https://doi.org/10.1007/s11187-010-9283-6]. Crossref, Google Scholar
Fundação de Proteção e Defesa do Consumidor (2023). Pesquisa comportamental: Discriminação nas relações de consumo, percepção do consumidor. [www.procon.sp.gov.br/wp-content/uploads/2023/03/Relat-Disc-23-revisada.pdf]. Google Scholar
Gama, APM, FD Duarte and JP Esperança (2017). Why discouraged borrowers exist? An empirical (re)examination from less developed countries. Emerging Markets Review, 33, 19–41, [https://doi.org/10.1016/j.ememar.2017.08.003]. Crossref, Google Scholar
Hero, RE and ME Levy (2016). The racial structure of economic inequality in the United States: Understanding change and continuity in an era of great divergence. Social Science Quarterly, 97(3), 491–505, [https://doi.org/10.1111/ssqu.12327]. Crossref, Google Scholar
Hordge-Freeman, E (2015). The Color of Love: Racial Features, Stigma, and Socialization in Black Brazilian Families. Austin, Texas: University of Texas Press. Google Scholar
International Labor Organization (2019). Small matters. Global evidence on the contribution to employment by the self-employed, micro-enterprises and SMEs. [www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_723282.pdf]. Google Scholar
Jappelli, T (1990). Who is credit constrained in the U.S. economy? The Quarterly Journal of Economics, 105(1), 219, [https://doi.org/10.2307/2937826]. Crossref, Google Scholar
Kon, Y and DJ Storey (2003). A theory of discouraged borrowers. Small Business Economics, 21(1), 37–49, [https://doi.org/10.1023/A:1024447603600]. Crossref, Google Scholar
Kumar, A (2004). Access to Financial Services in Brazil. The World Bank, [https://doi.org/10.1596/0-8213-5716-6]. Crossref, Google Scholar
Levenson, AR and KL Willard (2000). Do firms get the financing they want? Measuring credit rationing experienced by small businesses in the U.S. Small Business Economics, 14(2), 83–94, [https://doi.org/10.1023/A:1008196002780]. Crossref, Google Scholar
Loury, GC (2021). The Anatomy of Racial Inequality: With a New Preface. MA: Harvard University Press. Google Scholar
Marinho, N (2019, February 26). Empresário leva gravata na frente da filha e acusa banco e PM de racismo. Correio. [www.correio24horas.com.br/salvador/empresario-leva-gravata-na-frente-da-filha-e-acusa-banco-e-pm-de-racismo-0219]. Google Scholar
Mol-Gómez-Vázquez, A, G Hernández-Cánovas and J Koëter-Kant (2019). Bank market power and the intensity of borrower discouragement: Analysis of SMEs across developed and developing European countries. Small Business Economics, 53(1), 211–25, [https://doi.org/10.1007/s11187-018-0056-y]. Crossref, Google Scholar
Monteiro, JA (2001). O empresário negro: Histórias de vida e trajetórias de sucesso em busca da afirmação social. Produtor Editorial Independente. Google Scholar
Morais, MCA, ML Emmendoerfer, JR Vitória and WDA Mendes (2022). Socioeconomic determinants of the individual micro-entrepreneur (MJ Presti, Trans.). REGEPE — Revista de Empreendedorismo e Gestão de Pequenas Empresas, e2070, [https://doi.org/10.14211/ibjesb.e2070]. Crossref, Google Scholar
Nalin, LC and C da S Lopes (2021). Uma análise das relações de poder no campo da segurança: As interações entre vigilantes e policiais nas portas giratórias de agências bancárias. O Público e o Privado, 38(Jan./Apr.), 233–58. Google Scholar
Neville, F, JK Forrester, J O’Toole and A Riding (2018). Why even bother trying? Examining discouragement among racial-minority entrepreneurs: Racial-minority entrepreneurs and discouragement. Journal of Management Studies, 55(3), 424–56, [https://doi.org/10.1111/joms.12319]. Crossref, Google Scholar
Nguyen, TT (2021). Discouraged borrowing, credit rationing and firm growth: A learning model in small firm. Doctoral dissertation, University of Warwick. [webcat.warwick. ac.uk/record=b3728683]. Google Scholar
Nogueira, JC (Ed.) (2014). Desenvolvimento e empreendedorismo afrobrasileiro: Desafios históricos e perspectivas para o século 21. Atilènde. Google Scholar
Nogueira, MO (2016). A problemática do dimensionamento da informalidade na economia brasileira (Texto Para Discussão No. 2221). Instituto de Pesquisa Econômica Aplicada, [https://repositorio.ipea.gov.br/bitstream/11058/6907/1/td_2221.pdf]. Google Scholar
Nogueira, O (1998). Preconceito de marca: As relações raciais em Itapetininga. EDUSP. Google Scholar
Oliveira, OV de and SHAC Forte (2014). Microempreendedor individual: Fatores da informalidade. Connexio, 4, 27–42. Google Scholar
Omar, R (2018). Discouraged borrowers: Evidence from Malaysian SMES. Ph.D. Thesis Submitted to Othman Yeop Abdullah Graduate School Of Business, Universiti Utara, Malaysia, 263 p. Google Scholar
Omi, M and H Winant (2015). Racial Formation in the United States. NY: Routledge/Taylor and Francis Group. Google Scholar
Organization for Economic Co-operation and Development (2020). SME and Entrepreneurship Policy in Brazil 2020. [https://doi.org/10.1787/cc5feb81-en]. Google Scholar
Osório, RG (2021). A Desigualdade racial no Brasil nas últimas três décadas (Texto Para Discussão No. 2657). Instituto de Pesquisa Econômica Aplicada, [https://repositorio.ipea.gov.br/bitstream/11058/10623/1/td_2657.pdf]. Google Scholar
Otto, IMC and JDC Vieira (2020). Empreendedorismo no Brasil: Resultados das políticas públicas para pequenos negócios. Brazilian Journal of Development, 6(11), 84279–298, [https://doi.org/10.34117/bjdv6n11-005]. Crossref, Google Scholar
Paixão, M (2021). Race and social inequality in 20th and 21st-Century Brazil. In Oxford Research Encyclopedia of Latin American History. Oxford University Press, [https://doi.org/10.1093/acrefore/9780199366439.013.848]. Crossref, Google Scholar
Paixão, M (2023). Credit rationing and race in two Brazilian cities. The Review of Black Political Economy [https://doi.org/10.1177/00346446231168808]. Crossref, Google Scholar
Park, Y and S Coleman (2009). Credit rationing and black-owned firms: Is there evidence of discrimination? Journal of Developmental Entrepreneurship, 14(03), 255–71, [https://doi.org/10.1142/S1084946709001302]. Link, Google Scholar
Ramos, S and L Musumeci (2005). Elemento suspeito: Abordagem policial e discriminação na cidade do Rio de Janeiro. Civilização Brasileira. Google Scholar
Rao, JNK and AJ Scott (1984). On Chi-Squared tests for multiway contingency tables with cell proportions estimated from survey data. The Annals of Statistics, 12(1). [https://doi.org/10.1214/aos/1176346391]. Crossref, Google Scholar
Raturi, M and AV Swamy (1999). Explaining ethnic differentials in credit market outcomes in Zimbabwe. Economic Development and Cultural Change, 47(3), 585–604, [https://doi.org/10.1086/452420]. Crossref, Google Scholar
Ribeiro-Soriano, D (2017). Small business and entrepreneurship: Their role in economic and social development. Entrepreneurship and Regional Development, 29(1–2), 1–3, [https://doi.org/10.1080/08985626.2016.1255438]. Crossref, Google Scholar
Rossetto, I (2006). Economia solidária e igualdade racial: Contribuições para a construção de um diálogo. Unpublished Master Thesis. Universidade Federal do Rio de Janeiro. Google Scholar
Rostamkalaei, A, M Nitani and A Riding (2020). Borrower discouragement: The role of informal turndowns. Small Business Economics, 54(1), 173–88, [https://doi.org/10.1007/s11187-018-0086-5]. Crossref, Google Scholar
Sánchez Vidal, J, C Mac an Bhaird, BM Lucey and C Gurdgiev (2012). What determines the decision to apply for credit? Evidence for Eurozone SMEs. SSRN Electronic Journal. [https://doi.org/10.2139/ssrn.2170669]. Crossref, Google Scholar
Santanna, D (2023). Providing consumer credit to low-income populations in Brazil—The case of Complexo da Penha. Social Sciences, 12(12), 691, [https://doi.org/10.3390/socsci12120691]. Crossref, Google Scholar
Schiavinatto, F (Ed.) (2011). Sistema de indicadores de percepção social (SIPS). Instituto de Pesquisa Econômica Aplicada, [https://repositorio.ipea.gov.br/bitstream/11058/3097/1/Livro_Sistema%20de%20indicadores%20de%20percep%C3%A7%C3%A3o%20social%20%28SIPS%29_1%20ed.pdf]. Google Scholar
Schwingel, I and G Rizza (2013). Políticas públicas para a formalização das empresas: Lei geral das micro e pequenas empresas e iniciativas para a desburocratização. Políticas Em Foco, Mercado de Trabalho, 54(Feb.), 47–56. Google Scholar
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas. (2013). Perfil do Microempreendedor individual 2013. [bibliotecas.sebrae.com.br/chronus/ARQUIVOS_CHRONUS/bds/bds.nsf/ebb82ea6cdbbacde43591ec5b7302141/%24File/4582.pdf]. Google Scholar
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas. (2019). Pesquisa perfil do MEI 2019. [datasebrae.com.br/wp-content/uploads/2019/08/013_0319_APRE_MEI_v15_principais-resultados-inicio.pdf]. Google Scholar
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas. (2020). Pesquisa sobrevivência das empresas. [drive.google.com/file/d/1w8geGHr_gZpmEoV9iov4kcPSuvbZshTT/view]. Google Scholar
Solorzano, D, M Ceja and T Yosso (2000). Critical race theory, racial microaggressions and campus racial climate: The experiences of African American college students. The Journal of Negro Education, 69(1/2), 60–73. JSTOR. Google Scholar
Solórzano, DG and L Pérez Huber (2020). Racial Microaggressions: Using Critical Race Theory to Respond to Everyday Racism. NY: Teachers College Press. Google Scholar
Soupin, E (2020, January 30). Lorenna Vieira, mulher de Rennan da Penha, diz ter sido vítima de preconceito e racismo em agência do Itaú. G1. [g1.globo.com/rj/rio-de-janeiro/noticia/2020/01/30/mulher-de-rennan-da-penha-afirma-ter-sido-vitima-de-preconceito-e-racismo-em-agencia-do-itau.ghtml]. Google Scholar
StataCorp. (2023). Stata Statistical Software: Release 18 [Computer software]. StataCorp LLC. Google Scholar
Statnik, J-C, T-L-G Vu and L Weill (2023). Does corruption discourage more female entrepreneurs from applying for credit? Comparative Economic Studies, 65(1), 1–28, [https://doi.org/10.1057/s41294-022-00184-5]. Crossref, Google Scholar
Sternthal, MJ, N Slopen and DR Williams (2011). Racial disparities in health: How much does stress really matter? Du Bois Review: Social Science Research on Race, 8(1), 95–113, [https://doi.org/10.1017/S1742058X11000087]. Crossref, Google Scholar
Stigler, GJ (1961). The economics of information. Journal of Political Economy, 69(3), 213–25, [https://doi.org/10.1086/258464]. Crossref, Google Scholar
Stiglitz, JE and A Weiss (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3, Jun.), 393–410. Google Scholar
Tang, Y, C Deng and A Moro (2017). Firm-bank trusting relationship and discouraged borrowers. Review of Managerial Science, 11(3), 519–41, [https://doi.org/10.1007/s11846-016-0194-z]. Crossref, Google Scholar
Telles, E (2006). Race in Another America: The Significance of Skin Color in Brazil. NJ: Princeton University Press. Google Scholar
Telles, E (2014). Pigmentocracies: Ethnicity, Race and Color in Latin America. NC: University of North Carolina Press. Google Scholar
The World Bank (2024). GDP (current US$)—Latin America and Caribbean [dataset]. [https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2021andlocations=ZJandstart=1961andview=chart]. Google Scholar
Theodoro, M (2022). A sociedade desigual: Racismo e branquitude na formação do Brasil. Zahar. Google Scholar
Thurik, R and S Wennekers (2004). Entrepreneurship, small business and economic growth. Journal of Small Business and Enterprise Development, 11(1), 140–49, [https://doi.org/10.1108/14626000410519173]. Crossref, Google Scholar
Victor, D (2007, October 5). Tj anula absolvição do vigilante que mastou cliente de banco no Rio. G1. [g1.globo.com/Noticias/Rio/0,MUL145139-5606,00-TJ+ANULA+ABSOLVICAO+DO+VIGILANTE+QUE+MATOU+CLIENTE+DE+BANCO+NO+RIO.html]. Google Scholar
Wernli, R and A Dietrich (2022). Only the brave: Improving self-rationing efficiency among discouraged Swiss SMEs. Small Business Economics, 59(3), 977–1003, [https://doi.org/10.1007/s11187-021-00546-w]. Crossref, Google Scholar
Wiersch, A, BJ Lipman, K Wilson and LJ Misera (2022). Clicking for Credit: Experiences of Online Lender Applicants from the Small Business Credit Survey. [https://doi.org/10.26509/frbc-cd-20220816]. Crossref, Google Scholar
Williams, DR, JA Lawrence and BA Davis (2019). Racism and health: Evidence and needed research. Annual Review of Public Health, 40(1), 105–25, [https://doi.org/10.1146/annurev-publhealth-040218-043750]. Crossref, Google Scholar
Zambaldi, F, F Aranha, H Lopes and R Politi (2011). Credit granting to small firms: A Brazilian case. Journal of Business Research, 64(3), 309–15, [https://doi.org/10.1016/j.jbusres.2009.11.018]. Crossref, Google Scholar