Ep. 63: Gender bias in bank lending

Around the world, female entrepreneurs borrow less than their male counterparts. Many people suggest that the reason for this gap comes down to the fact that women select into less capital-intensive industries.

But in a paper in the American Economic Journal: Applied Economics, authors J. Michelle Brock and Ralph De Haas show that implicit bias against women leads to more onerous ​​guarantor requirements on loans. The findings come from a lab-in-the-field experiment conducted with over three hundred Turkish loan officers and real-life loan applications.

Brock says that the additional collateral requirements placed on female entrepreneurs could be a significant barrier to women running businesses. But there may be steps that banks can take to mitigate the problem.

Brock recently spoke with Tyler Smith about her and De Haas's experiment in Turkey and what lessons policymakers should take away from the results.