Attention Constraints and Financial Inclusion

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