GOOD

Micro-Bias: If You Want a Kiva Loan, It Helps to Be Pretty and Light-Skinned

Micro-lending sites like Kiva are an important development tool, but bias is affecting lending choices. Here's how to fix it.

Want to cash in on the surge in online peer-to-peer lending? As with many things in life, it helps to have a pretty smile. Sadly, it also helps to have lighter skin.

People who lend on Kiva.com tend to favor attractive, light-skinned females, according to an analysis set to be released by researchers at Nanyang Technological University in Singapore. To receive a loan online, it’s better to be pretty than ugly, female than male, skinny than fat and, yes, light-skinned than dark-skinned, the researchers found. “So, basically if you have any of these characteristics, you will get your money more quickly on Kiva.com,” says Walter Theseira, the lead author of the study.

Kiva allows internet users to browse candidates for charitable microloans around the world, sort by country or type of project, and then—while viewing a picture of the potential borrower—click a few buttons to lend to a microfinance agency supporting that individual. Kiva recently launched a pilot that allows users to lend directly to borrowers without the middleman, but the study focused exclusively on the main Kiva site.

Theseira conducted the study with Christina Jenq at the University of Chicago’s Booth School of Business and Jessica Pan at the National University of Singapore. The researchers used a skin color scale used in research on bias against new immigrants and found conclusively that lighter-skinned borrowers got loans faster. Being attractive was even more helpful.

“This is why [NGOs] spend so much time choosing just the right photographs to illicit donations,” Theseira says. People respond more, and with donations, to pretty, smiling faces. But “as for why people do that... it’s a bit hard to say,” he cautions. “Our hypothesis is this is probably more a form of implicit discrimination than people acting on explicit bias.”


Dark skin may slow the pace of receiving money through Kiva, but being from Africa helps enormously. Loans to Kenya fund several times faster than loans to Bulgaria on the platform. Geographic discrimination is far more important than skin tone. Users tend to believe there is more need in poorer countries, and African countries tend to be poorer. Lenders may also feel their dollars will go farther with a microloan to Africa than elsewhere. On Kiva, the skin tone bias only crops up strongly after other factors are accounted for.

While a litany of microfinance literature recommends lending to women over men—to counteract discrimination and because women tend to use money more prudently—the measurable presence of race bias serves as a warning to crowdfunding sites and donors alike. This sector is booming now, powered by promises to democratize lending and open doors to those excluded or discriminated against by traditional banking. Baked-in bias in peer-to-peer choices could undermine the very idea of a financial solution to unfairness.

Theseira’s research is part of the first wave of hard evidence that donors respond to subconscious bias in deciding where to drive their peer-to-peer charity and lending dollars.
It fits an all-too-common pattern on the internet: Stanford researchers found online shoppers were less trusting of someone selling an iPod online if the hand in the photo holding the iPod was black. A Wharton study found that black borrowers on peer-to-peer lending site Prosper.com were up to 35 percent less likely to get a loan at a similar interest rate as comparable white borrowers. In response, Prosper stopped including photos in user profiles.

Expect to see more academics examining online crowdfunding, microfinance, and lending sites. The question now is what the sites can do to fix the problem. Theseira suggests regular Kiva users could offer the key to a solution.

"What we found [on Kiva] are these patterns of discrimination are most evident in people who don’t lend much," he says. Habitual use of a site, he reasons, makes the lender more strategic, more businesslike, and less biased. Instead of just clicking on pretty faces, repeat users scan and search for details more relevant to loan-worthiness. "In the case of the Kiva website itself," Theseira says, "I think if we can try to establish more clearly whether it’s implicit discrimination or something else, it might be possible to use technology to address it." In other words, a lending site could show newer users a set of profiles designed to counteract measured biases.

There is also some evidence that race bias is more pronounced when we are overwhelmed with choice and when we make split-second decisions—a finding that came from a study of NBA refereeing but that Theseira suggests could apply to online lending, too. Offering fewer choices, or designing elements of a site to slow the decision-making process could help. Once you’ve used the site more often, the design could subtly change for you, he suggests.

Theseira, like any researcher at the tip of an iceberg, wants more data on why people prefer to fund light-skinned pretty people in charitable and lending decisions before he’ll commit to a prescription. He’s expanding his research to European lending site myc4.com, where investors earn interest, in contrast to Kiva’s zero-interest loans, to more fully understand the incentives behind lender decision-making.

For its part, Kiva is admirably open about the bias problem, and its leaders are eager to innovate their way around micro-discrimination. The company has observed geography, industry, and male-female bias. Kiva has opened up its data to other researchers to investigate further. More details on the nature of any bias will help point to a plan to counteract it.

Photo courtesy of Kiva.com

Articles

October is domestic violence awareness month and when most people think of domestic violence, they imagine mostly female victims. However, abuse of men happens as well – in both heterosexual and homosexual relationships. But some are taking it upon themselves to change all that.

Keep Reading Show less
Culture

At this point most reasonable people agree that climate change is a serious problem. And while a lot of good people are working on solutions, and we're all chipping in by using fewer plastic bags, it's also helpful to understand where the leading causes of the issue stem from. The list of 20 leading emitters of carbon dioxide by The Guardian newspaper does just that.

Keep Reading Show less
The Planet
via International Labour Organization / Flickr and Michael Moore / Facebook

Before the release of "The Joker" there was a glut of stories in the media about the film's potential to incite violence.

The FBI issued a warning, saying the film may inspire violence from a group known as the Clowncels, a subgroup of the involuntarily celibate or Incel community.

Incels an online subculture who believe they are unable to attract a sexual partner. The American nonprofit Southern Poverty Law Center describes them as "part of the online male supremacist ecosystem" that is included in its list of hate groups.

Keep Reading Show less
Culture

Since normalizing relations with Communist China back in 1979, the U.S. government and its companies that do business with the country have, for the most part, turned a blind-eye to its numerous human rights abuses.

In China's Muslim-majority province of Xinjiang, it's believed that over a million members of its Uighur population are being arbitrarily imprisoned and tortured in concentration camps. Female Uighurs in detention are being given forced abortions and subjected to sexual mistreatment.

Keep Reading Show less
Culture

The vaping epidemic is like a PSA come to life. A recent outbreak of vaping-related deaths and illnesses has affected people from across 46 states. More than 800 people fell ill, and at least 17 people died from vaping. In Illinois and Wisconsin, 87% of the people who got sick said they used THC, and 71% of people also said they used products that contained nicotine. Symptoms of the illness included coughing, chest pains, shortness of breath, nausea, and fatigue. We finally might now why.

Researchers from the Mayo Clinic believe toxic chemical fumes, not the actual chemicals in the vape liquid, might be the culprit. "It seems to be some kind of direct chemical injury, similar to what one might see with exposures to toxic chemical fumes, poisonous gases and toxic agents," Dr. Brandon Larsen, a surgical pathologist at the Mayo Clinic in Arizona, said in release.

Keep Reading Show less
Health