Biases in Prosocial Lending? Methods and Application to Microcredit

52 Pages Posted: 17 Aug 2023

See all articles by Anastasia Cozarenco

Anastasia Cozarenco

Montpellier Business School; Université Montpellier II - Montpellier Research in Management (MRM); Université Libre de Bruxelles (ULB) - CERMi (Centre for European Research in Microfinance)

Ariane Szafarz

Université Libre de Bruxelles (ULB)

Abstract

Our test procedure for discrimination in lending combines denial rates and recovery rates and is applicable to simple and intersectional discrimination regardless of the profit orientation of the lender. Using a European microcredit dataset, the tests reveal that the positive—and socially consistent—intersectional bias toward immigrant women masks the striking fact that loan applications submitted by European women are treated more harshly than those of their male counterparts. The results suggest that even prosocial lenders are not immune to gender bias. Our conclusion discusses avenues for further research, particularly for detecting bias in fintech lending.

Keywords: Discrimination in lending, Intersectional discrimination, Prosocial lending, Gender, Ethnicity, Recovery rate.

Suggested Citation

Cozarenco, Anastasia and Szafarz, Ariane, Biases in Prosocial Lending? Methods and Application to Microcredit. Available at SSRN: https://ssrn.com/abstract=4543809 or http://dx.doi.org/10.2139/ssrn.4543809

Anastasia Cozarenco

Montpellier Business School ( email )

Université Montpellier II - Montpellier Research in Management (MRM) ( email )

Place Eugène Bataillon
Montpellier, 34095
France

Université Libre de Bruxelles (ULB) - CERMi (Centre for European Research in Microfinance) ( email )

Campus du Solbosch
Avenue F.D. Roosevelt 21 - CP145/1
B-1050 Brussels
Belgium

Ariane Szafarz (Contact Author)

Université Libre de Bruxelles (ULB) ( email )

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