How to identify lending bias when the lender's goal is not profit?

Anastasia Cozarenco and Ariane Szafarz

No 24-007, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Outcome tests for discrimination in the credit market typically assume that profit is the lender’s goal. This assumption ignores nonprofit and social lending institutions that value prosocial outcomes. These institutions may combine positive and negative discrimination, further complicating the identification of bias. We propose a test for discrimination in lending that is robust to the profit orientation of the lender. Consistent with the Basel framework for credit risk management, our test is based on recovery records. It is applicable to the identification of both positive and negative bias.

Keywords: Test for credit discrimination; prosocial lender; social finance; discrimination; affirmative action (search for similar items in EconPapers)
JEL-codes: C12 C44 D63 G21 J15 J16 (search for similar items in EconPapers)
Date: 2024-03-15
New Economics Papers: this item is included in nep-ban
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