Attention Constraints and Financial Inclusion

76 Pages Posted: 15 Jun 2021 Last revised: 31 May 2022

See all articles by Bo Huang

Bo Huang

Renmin University of China - School of Finance

Jiacui Li

David Eccles School of Business, University of Utah

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics

Yiyuan Zhou

The University of Hong Kong - Faculty of Business and Economics

Date Written: June 1, 2021

Abstract

We show that attention constraints of decision makers function as barriers to financial inclusion. Using administrative data on retail loan screening processes, we find that loan officers exert less effort reviewing applicants from unattractive social or economic backgrounds and reject them more frequently than justified by credit quality. More importantly, when quasi-random workload variations tighten officer attention constraints, unattractive applicants receive even worse treatment—review-time halves and approval rates drop by approximately 40%—while attractive applicants are not affected. Our findings suggest that financial technologies that reduce information-processing costs may promote more balanced financial access.

Keywords: Attention Constraint, Financial Inclusion, Diversity, Retail Lending

JEL Classification: D83, D91, G21

Suggested Citation

Huang, Bo and Li, Jiacui and Lin, Tse-Chun and Tai, Mingzhu and Zhou, Yiyuan, Attention Constraints and Financial Inclusion (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3865478 or http://dx.doi.org/10.2139/ssrn.3865478

Bo Huang

Renmin University of China - School of Finance

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Jiacui Li (Contact Author)

David Eccles School of Business, University of Utah ( email )

8123 SFEBB, 1655 Campus Center Dr
Salt Lake City, UT 84112
United States

HOME PAGE: http://https://www.jiacui-li.com/

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Yiyuan Zhou

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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