Gender Differences in Car Loan Access: An Empirical Analysis

Abstract

Across the world, there is a widely held view that women are subject to discrimination by financial institutions. Due to the rising social justice movement, which aims, in part, to increase gender equality, most developed countries have worked to reduce gender disparities in loan application processes. This study aims to analyze whether gender inequality exists in India's car loan industry. The dataset used in this paper contains the records of used car loans made in India between 2013 and 2015 to test whether gender discrimination exists in the used car loan application process. A regression-based method is used, and it is found that gender was a statistically significant predictor of disbursement, requested amount, and interest rate charged. Loan applications by women have a lower likelihood of approval when the applicants’ CIBIL scores are lower than 790.29. Furthermore, women with CIBIL scores lower than 769.54 are assigned higher interest rates than male applicants with comparable CIBIL scores. That indicates that taste-based discrimination against women with low CIBIL scores exists. A female applicant must obtain a spectacular CIBIL score to eliminate the negative consequences of gender inequality. Therefore, adopting gender-blind applications would lead to more equal outcomes in used car loans.