Intersectional Bias in Prosocial Lending: Methods and Application to Microcredit
44 Pages Posted: 15 Feb 2022
This paper develops a test for discrimination in lending combining denial rates and recovery rates. In contrast to the recent outcome-test methodology scrutinizing biases in the credit market with differential profits, our approach is applicable to (simple and intersectional) discrimination regardless of the profit orientation of the lender. In our European microcredit dataset, the tests reveal that the positive—and socially consistent—intersectional bias toward migrant women hides the striking fact that European Union women’s loan applications are handled more harshly than those of their male counterparts, which suggests that prosocial lenders are not immune to discriminatory attitudes stemming from entrenched gender stereotypes. Our conclusion discusses avenue for further research, particularly for detecting biases in fintech lending.
Keywords: Discrimination in lending, Intersectional discrimination, Prosocial lending, Migrants, Gender, Ethnicity, Recovery rate
Suggested Citation: Suggested Citation