Thursday, 10 November 2011

How banks discriminate against female customers

Just imagine.
You’ve got an exciting and bomb-proof proposal for a start-up and approach your bank for investment. Later you find out that you were:
-       asked more questions
-       offered less money
-       ask to provide higher collateral
than a male applicant approaching the same lender. Because you are female.
I'm pregnant, not brain-dead.

That’s just one of the findings in a new report published today by Noreena Hertz who is based at Duisenberg School of Finance, RSM, Erasmus University and University of Cambridge. She also reveals how women are refused mortgages, and their business acument is called into question, if they are pregnant.
Professor Hertz’s key findings include:
-        Evidence in the UK of banks discriminating against pregnant women and women on maternity leave seeking mortgages. This seems to be an ongoing industry-wide practice, with a number of leading UK high street banks named.

-        Evidence in Europe of banks discriminating against women entrepreneurs. Research suggests women are being asked for more collateral than men for loans, being charged higher interest rates and being refused loans more frequently than men.

-        Evidence of gender stereotyping by bank loan officers internationally. Examples of this include women entrepreneurs being questioned significantly more often than male applicants whether they have undertaken sufficient research into their business, and pregnant women being assumed by lending officers not to return to work after having a child.

The report asks banks to think carefully about whether their staff may be negatively stereotyping women, either consciously or unconsciously, and to take measures to address this. 

And it points out that the UK government has a responsibility to investigate this type of discrimination, which contravenes the United Nations Convention dictat on the Elimination of All Forms of Discrimination Against Women and the Equality Act of 2010. 

In fact it states that the government is legally obliged to take action after the disclosure of such discrimination, and such action would mean prosecuting the banks found guilty of such practice and compensating those who have been discriminated against.

Recently David Cameron could be heard pontificating about entrpreneurship being the ‘only strategy’ by which the UK economy could achieve significant growth. 
He also highlighted the need for entrepreneurs to have access to credit from banks in order to thrive. 
I wonder if he was aware that such access would be strongly influenced by the applicant’s gender?
You can download Professor Hertz's full report here.

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