Gender Bias in SME Lending
Gender disparities in small and medium-size enterprise lending exist around the world and impede the growth of millions of women-led firms. This paper examines a potential driver of these disparities: gender-biased loan officers. Officer bias is measured through a novel loan application experiment conducted with 77 loan officers in Turkish banks. The analysis finds that 35 percent of the loan officers are biased against female applicants, with women receiving loan amounts $14,000 lower on average compared with men. Experience in the banking sector can attenuate this bias, with each year of experience reducing gender biased loan allocations by 6 percent. The results suggest that loan officers may use gender bias as a heuristic device given limited information and risk aversion. Helping newly recruited and lesser experienced loan officers to better discern loan application quality may thus improve financing of business loans to women and reduce gender gaps in entrepreneurship.
| Main Authors: | , , , , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019-12
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| Subjects: | GENDER BIAS, SME FINANCE, FEMALE ENTREPRENEURS, ACCESS TO FINANCE, GENDER GAP, CREDIT, ENTREPRENEURSHIP, BANKING, SMALL AND MEDIUM ENTERPRISES, AFRICA GENDER POLICY, GENDER INNOVATION LAB, |
| Online Access: | http://documents.worldbank.org/curated/en/244611577766368167/Gender-Bias-in-SME-Lending-Experimental-Evidence-from-Turkey https://hdl.handle.net/10986/33120 |
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| Summary: | Gender disparities in small and
medium-size enterprise lending exist around the world and
impede the growth of millions of women-led firms. This paper
examines a potential driver of these disparities:
gender-biased loan officers. Officer bias is measured
through a novel loan application experiment conducted with
77 loan officers in Turkish banks. The analysis finds that
35 percent of the loan officers are biased against female
applicants, with women receiving loan amounts $14,000 lower
on average compared with men. Experience in the banking
sector can attenuate this bias, with each year of experience
reducing gender biased loan allocations by 6 percent. The
results suggest that loan officers may use gender bias as a
heuristic device given limited information and risk
aversion. Helping newly recruited and lesser experienced
loan officers to better discern loan application quality may
thus improve financing of business loans to women and reduce
gender gaps in entrepreneurship. |
|---|