We find that donors discriminate on the basis of attractiveness, skin color, and weight, preferring borrowers who are more attractive, who have lighter skin, and who are not overweight. The effects are statistically significant and robust, persisting across a variety of specifications and conditional on a full range of controls including country fixed effects, MFI fixed effects, economic sector and activity fixed effects, and date fixed effects. The effects are quantitatively significant. A borrower at the 75th percentile in terms of skin color (darker skin) is estimated to require 20% more time to have his or her loan funded than a borrower with lighter skin at the 25th percentile; similarly, a borrower at the 75th percentile in attractiveness (more attractive) requires almost 25% less time to receive full funding.The authors speculate that weight has to do with perceptions of need. They say that previous studies show that people want their money to have the greatest impact and believe that it often believed that the person with the greatest need will maximize impact. Attractiveness does not seem very surprising to me and the same goes with skin color.
We also find evidence that donors appear to strongly prefer lending to women compared to men, making group loans instead of individual loans, and lending to borrowers from poorer countries. We conjecture that these preferences are in part driven by the substantial evidence circulated in the media on the success of microfinance institutions which concentrate on group lending and lending to women. However, our evidence on the strong impact of attractiveness, skin color, and weight are difficult to reconcile with any consensus or even popular evidence on the value of increased capital access to more attractive, lighter skinned, skinny individuals when it comes to economic development. We thus interpret our findings as suggesting the presence of significant discrimination on the part of donors in microfinance.
Gender something which alarms me a bit, but also seems to make sense. Microfinance has been packaged to be something which is portrayed as aimed at women. In fact many MFIs will only offer their services to women. With that picture established, I speculate that potential lenders believe that there is validity in giving to women and lean towards them for a loan. I do not mean to undermine the premise that women could be a better investment, but the study which made that claim has come under heavy scrutiny recently.
I would like to know more about why women received greater support as well as if gender does have an impact on the safety of an investment. It is possible that there is no difference in gender or that it is not the same for each country or even that different businesses will have more or less success depending on the gender of the owner. These are questions that have yet to be answered, but the narrative of microfinance continues to act as if they have.
This is also only one study of one site for one month. Jumping to immediate conclusions would be wrong. A more expansive study is definitely in order and it would be worth offering some tweaks to see what can support those who are hampered by lender bias. As it always seems, studies like this one bring up more questions than it answers them and ends with the desire for more research...
9 comments:
I don't see what is so striking; these patterns reflect bias in every day life. Unless we're operating under the premise that somehow Kiva lenders do not take into account attractiveness, skin color, and weight, or at least less so than the rest of the population as a whole, this makes complete sense. That's not a justification - it's just that the findings reiterate what we all know - that physical appearance does matter. It's what everyone is told before a job interview, it's why lots of people will try to lose weight even though they don't necessarily need to. Again, I'm not saying this is how it should be, only that it reflects current reality.
I agree with you about what I see as effectively reverse gender discrimination underway in not only aid, but in the provision of many other services by nonprofit organizations. Helping women is critically important and does have greater multiplier effects on society, I believe. But it seems like we're in danger of cutting out the men altogether. At a recent event I was very disappointed to hear a speaker advocate "don't waste your time on any males to Africa, because all those lazy sods do is eat and sleep and drink". It's unreasonable and unfeasible to expect society to succeed by supporting SOLELY women. That said, I do believe that investing in women is critical to development.
Thanks Nabeel. Excellent points made. I could not agree with you more when you say, "I do believe that investing in women is critical to development."
I just finished doing research on urban farming in Senegal. One of the ways in which urban farming is practiced is via microgardening, which is a government initiative. It was initially aimed at "the poor" and "youth," but has ended up being practiced more by comparatively well-off women. These women are looking for extra funding so that they can expand their activities. They absolutely know it is in their best interest to start a group and to file the required paperwork so that they are more formalized, and therefore more attractive to independent donors. What I enjoy seeing is how they work the system and how they are so absolutely tuned into what donors want to see. What's also fascinating is how different perceptions of reality are between donors and the women themselves, and how people leverage perceptions towards their own self-interest/well-being. I really don't think these women see themselves as subjugated at all. They access resources in multiple ways to benefit the overall well-being of their households. And, as far as I can tell, their husbands don't begrudge them at all.
Anyways...there's a lot going on here with respect to how people access resources, how 'access' itself is a form of capital that is facilitated by social and economic status, dissonance in perceptions of reality, how people exercise agency in accessing resources....and a lot of it challenges perceptions with respect to how, and to whom, aid gets administered.
Not very surprising given Kiva's 'beauty-contest' 'tell best story' funding scheme. Most folks funding Kiva loans have never travelled/worked/studied the countries/cultures/needs of those seeking funding. No peer-review, rather 'pick ME' charity.
Beyond lacking rigorous upfront evaluation, I'm alarmed by Kiva's lending rate. Kiva "partners" charge market average rates for short-term loans, even though no money is at risk and comes to partners at zero-interest. Kiva's charitable source of funds should permit partners to lend BELOW (often usury) market rates. High overhead or fat profits?
Either way Kiva appears focused on promo front-end and out-sources critical loan relationship. If focused on social network/fund-raising vs actual recipient/community need, you should expect "socially" biased results.
PRO micro-credit schemes, local lending groups, peer review.
Thanks Stephanie. Any chance you can share your research. I would be interested in learning more. Frankly I am not surprised by what you find. Although it is certainly a good thing to support business growth, what you experienced is not the same thing that many people hear when microfinance is touted. I definitely want to hear more on your ideas of access. That is a pretty important component to administering aid interventions.
I've only just started to write up my results. I'm doing 3 different papers, and the first one is on gender. I'll probably get at something related to what we're talking about here in that first paper and will indeed share it...I just have to figure out when the proper time to do that is.
The authors may conjecture that Kiva donors have been reading reports about microfinance successes and failures. As a professional cynic I have to voice my skepticism. Women are just often perceived as 'needier' (it's always damsels who are in distress, killing innocent women in wartime is somehow worse than killing innocent men). Ditto "groups" might further improve the warm, fuzzy feeling for donors that this is all a great bit of social do-goodery, forgetting that the management challenges are much simpler for single owner businesses. These strike me as simpler more likely explanations than that Kiva donors have been reading up on the technical side of microfinance.
Excellent point. I do not see any reason to disagree with you on that. Especially the point about women. I think larger narratives paint them and children as in need of our help.
"Microfinance has been packaged to be something which is portrayed as aimed at women." Isn't that rather silly? Both men and women need money. I don't understand this kind of gender bias.
online cash advance
Post a Comment