DP14340 Discriminatory Lending: Evidence from Bankers in the Lab

Author(s): Michelle Brock, Ralph de Haas
Publication Date: January 2020
Date Revised: April 2020
Keyword(s): banks, Gender Discrimination, guarantors, Implicit bias, lab-in-the-field
JEL(s): D81, D83, D91, G21
Programme Areas: Financial Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14340

We implement a lab-in-the-field experiment with 334 Turkish loan officers to test for the presence, and learn about the mechanisms, of gender discrimination in small business lending. Each officer reviews multiple real-life loan applications in which we randomize the applicant's gender. While provisional approval rates are the same for male and female applicants, we detect a more subtle form of discrimination. Loan officers are 30 percent more likely to make approval conditional on the presence of a guarantor when we present an application as coming from a female instead of a male entrepreneur. This discrimination is concentrated among young, inexperienced, and gender-biased loan officers. Discrimination is also most pronounced for loans that performed well in real life, making it costly to the bank.