Biases in Prosocial Lending? Methods and Application to Microcredit
52 Pages Posted: 17 Aug 2023
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.
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