Gender Bias in SME Lending: Experimental Evidence from Turkey

28 Pages Posted: 2 Jan 2020

Date Written: December 30, 2019

Abstract

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.

Suggested Citation

Alibhai, Salman and Donald, Aletheia Amalia and Goldstein, Markus P. and Oguz, Alper Ahmet and Pankov, Alexander and Strobbe, Francesco, Gender Bias in SME Lending: Experimental Evidence from Turkey (December 30, 2019). World Bank Policy Research Working Paper No. 9100, Available at SSRN: https://ssrn.com/abstract=3512295

Salman Alibhai (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
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Aletheia Amalia Donald

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Markus P. Goldstein

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Alper Ahmet Oguz

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Alexander Pankov

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Francesco Strobbe

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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