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.”