Intersectional Bias in Prosocial Lending: Methods and Application to Microcredit

44 Pages Posted: 15 Feb 2022

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), Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Abstract

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

Cozarenco, Anastasia and Szafarz, Ariane, Intersectional Bias in Prosocial Lending: Methods and Application to Microcredit. Available at SSRN: https://ssrn.com/abstract=4035236 or http://dx.doi.org/10.2139/ssrn.4035236

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), Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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