Gender Discrimination in Small Business Lending

The paper presented in this ZEW Research Seminar tests for the presence of gender discrimination in small business lending through a lab-in-the-field experiment with 334 Turkish loan officers. Each officer reviews multiple loan applications in which it is randomized the applicant’s gender. While unconditional approval rates are the same for male and female applicants, it is detected a more subtle form of discrimination. Loan officers are 30 percent more likely to make loan approval conditional on the presence of a guarantor when it is presented an application as coming from a female instead of a male entrepreneur. This gender discrimination is concentrated among young, inexperienced, risk averse, and gender-biased loan officers. Discrimination is also most pronounced for loans that perform well in real life, making it costly to the bank. Experimental variation in the available applicant information does not impact lending decisions, suggesting that the nature of discrimination is implicit rather than statistical.