Discriminatory Lending: Evidence from Bankers in the Lab

Last registered on February 25, 2022
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Pre-Trial

Trial Information

General Information

Title
Discriminatory Lending: Evidence from Bankers in the Lab
RCT ID
AEARCTR-0009025
Initial registration date
February 24, 2022

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
February 24, 2022, 1:53 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
February 25, 2022, 2:45 AM EST

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
Turkey
Region

Primary Investigator

Name
Ralph De Haas
Affiliation
EBRD
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Michelle Brock
PI Affiliation
EBRD
Contact Investigator

Additional Trial Information

Status
Completed
Start date
2016-09-01
End date
2017-10-01
Keywords
Behavior, Finance & Microfinance, Gender, Lab
Additional Keywords
Gender bias, bank credit, implicit association test, lab-in-the-field, causal forest
JEL code(s)
D81, D83, D91, G21, G41, L26
Secondary IDs
Heartland Institutional Review Board 160920-23
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We implement a lab-in-the-field experiment with 334 Turkish loan officers to document gender discrimination in small business lending and to unpack the mechanisms at play. Each officer reviews multiple real-life loan applications in which we randomize the applicant's gender. While unconditional approval rates are the same for male and female applicants, loan officers are 26 percent more likely to require a guarantor when we present the same application as coming from a female instead of a male entrepreneur. A causal forest algorithm to estimate heterogeneous treatment effects reveals that this discrimination is strongly concentrated among young, inexperienced, and gender-biased loan officers. Discrimination mainly affects female loan applicants in male-dominated industries, indicating how financial frictions can perpetuate entrepreneurial gender segregation across sectors.
External Link(s)

Registration Citation

Citation
Brock, Michelle and Ralph De Haas. 2022. "Discriminatory Lending: Evidence from Bankers in the Lab." AEA RCT Registry. February 25. https://doi.org/10.1257/rct.9025-1.1
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Participants evaluated four applicant forms (henceforth "loan applications'') in the main part of the experiment. We randomly presented these applications as coming from a woman or a man. Participants had to decide whether to approve or reject each application and, in case of initial approval, whether to request a guarantor or not. For each application, participants also had to provide a subjective repayment probability between 0 and 100. We did not constrain the time participants had to evaluate the applications and there was no feedback to participants about their decisions during the session. The sessions were framed as a general training exercise and no gender-related issues were mentioned.
Intervention Start Date
2016-09-01
Intervention End Date
2017-10-01

Primary Outcomes

Primary Outcomes (end points)
Conditional loan approval decisions and guarantor requirements.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We conducted our experiment in cooperation with a large commercial bank in Turkey. Over a two-month period, 22 experimental sessions were held with a total of 334 bank employees across eight cities (Adana, Ankara, Antalya, Bursa, Gaziantep, Istanbul, Izmir, and Trabzon). We also conducted a pilot session with 32 loan officers in Istanbul but do not use these pilot data. The bank operates a regional office in each of these cities and participants were randomly selected from all bank employees involved in small business lending (which makes up two-thirds of the bank's loan portfolio.
We incentivized decisions in line with common bank incentive schemes. Participants earned ten points (equivalent to ten Turkish lira) for each completed review (quantity) and an additional five points when they correctly approved a loan that performed well in real life (quality). Five points were deducted when they incorrectly accepted a loan that was defaulted on in real life. When participants approved a file that had been declined in real life, we gave them a 50/50 chance that the file was counted as performing, thus yielding the extra five points. We did not penalize incorrect rejections in order to mimic the incentive scheme at the bank, and the bank cannot realistically know when a rejection is incorrect.
Participants evaluated four applicant forms (henceforth "loan applications'') in the main part of the experiment. We randomly presented these applications as coming from a woman or a man. Participants had to decide whether to approve or reject each application and, in case of initial approval, whether to request a guarantor or not. For each application, participants also had to provide a subjective repayment probability between 0 and 100. We did not constrain the time participants had to evaluate the applications and there was no feedback to participants about their decisions during the session. The sessions were framed as a general training exercise and no gender-related issues were mentioned.

The task closely mimicked the daily choices that participants make in real life at work. Specifically, we presented all loan applications electronically and in the standard application format that bank staff normally process on their computers. The loan applications contained all the information that was required for determining creditworthiness of an applicant and that was available at the time the application was processed. The loan applications did not include information about whether in real life a guarantor was requested.

We use 100 applications, selected from an initial sample of 250. These 250 applications were a stratified random sample of all first-time applications by existing SMEs (that is, no start-ups) that the bank received in the three to six years before the experiment. Using this earlier period allows us to track what happened to each application in real life. The strata were region, gender, firm size, and whether the application was performing, non-performing or declined in real life. By using applications from applicants who had never before borrowed from our partner bank, we minimize the influence of soft information generated over time. All applications were gender neutral except for the randomly assigned name.
Experimental Design Details
Randomization Method
Randomization at loan officer*file level done by PC.
Randomization Unit
Individual.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
1,336 decisions made by 334 loan officers.
Sample size: planned number of observations
1,336 decisions, 668 per treatment.
Sample size (or number of clusters) by treatment arms
334 loan officers and 1,336 decisions.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Heartland Institutional Review Board
IRB Approval Date
Details not available
IRB Approval Number
160920-23
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
March 03, 2017, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
March 03, 2017, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
334 loan officers
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
1,336 decisions
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials