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EBRD economist Michelle Brook discusses gender-bias in lending

EBRD economist Michelle Brook discusses gender-bias in lending

 November 30, 2022

European Bank for Reconstruction and Development (EBRD) Senior Research Economist in the Office of the Chief Economist, Michelle Brock, looks at whether women entrepreneurs suffer from gender discrimination in small business lending in Turkey.

Testing for the presence of gender discrimination 

The paper, written with Director of Research at the EBRD, Ralph de Haas, 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 randomizes the applicant’s gender. While unconditional approval rates are the same for male and female applicants, Michelle detects a more subtle form of discrimination.

Loan officers are 30 per cent more likely to make loan approval conditional on the presence of a guarantor when we present an application as coming from a female instead of a male entrepreneur.

This gender discrimination is concentrated among young, inexperienced, 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.

Macroeconomic assessments of inequality

Michelle's research focuses on: social professional norms; attitudes toward risk and uncertainty; and inequality of opportunity. She is currently developing a project to study the role of risk attitudes in the choice to migrate abroad, and the link between migration and entrepreneurship.

Her work on inequality of opportunity includes macroeconomic assessments of inequality of opportunity and perceptions in the transition region, as well as microeconomic projects on gender and finance. For example, she is working on a project to study whether and how norms of gender bias against women impact lending to female firm owners in highly competitive credit markets. 

Michelle also studies how professional and social norms influence worker effort, and how non-monetary incentives can be used to complement wages. One example is a study on whether image concerns can be used to incentivize professionalism among judges in Tajikistan.

Michelle’s work contributes to the understanding of how behavioral economics operates in the real world and aims to establish links between the laboratory environment and the field. She uses experimental economics, randomized controlled trials and household surveys for her research. She completed her PhD in Agricultural and Resource Economics at the University of Maryland in 2011.

Read the paper in full. 

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