Discriminatory Lending: Evidence from Bankers in the Lab

50 Pages Posted: 11 Sep 2019 Last revised: 13 Apr 2020

See all articles by J. Michelle Brock

J. Michelle Brock

European Bank for Reconstruction and Development (EBRD)

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); Tilburg University - Department of Finance

Date Written: April 11, 2020

Abstract

We implement a lab-in-the-field experiment with 334 Turkish loan officers to test for the presence, and learn about the mechanisms, of gender discrimination in small business lending. Each officer reviews multiple real-life loan applications in which we randomize the applicant's gender. While provisional approval rates are the same for male and female applicants, we detect a more subtle form of discrimination. Loan officers are 30 percent more likely to make approval conditional on the presence of a guarantor when we present an application as coming from a female instead of a male entrepreneur. This discrimination is concentrated among young, inexperienced, and gender-biased loan officers. Discrimination is also most pronounced for loans that performed well in real life, making it costly to the bank.

Keywords: Gender discrimination; guarantors; implicit bias; lab-in-the-field; bank lending

JEL Classification: D81; D83; D91; G21; G41; L26

Suggested Citation

Brock, J. Michelle and De Haas, Ralph, Discriminatory Lending: Evidence from Bankers in the Lab (April 11, 2020). Available at SSRN: https://ssrn.com/abstract=3451337 or http://dx.doi.org/10.2139/ssrn.3451337

J. Michelle Brock (Contact Author)

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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