Assessing non-native discrimination in the consumer lending market

Abstract

This study seeks to gain an understanding on whether discrimination against non-natives in the French consumer lending market exists. This is done using the third wave of the Household Finance and Consumption Survey; an ECB-coordinated survey carried out by the Bank of France in 2017. The respondents were asked whether they have been rejected a loan in the past 3 years, together with other demographic and household balance sheet questions. This study uses the loan approval approach, by building two discrete choice models including a linear probability model and a probit model, where the probability of being accepted a loan is estimated. The key variable of interest in this study is the country of birth of the respondent, which is split into three groups being: France (the survey country), other European Union countries and non-European Union Countries. After controlling for other observable differences, both models suggest a weak effect on the probability of being accepted a loan for those who were born in another European Union country. However, both models also suggest that someone who was born in a non-European Union country has a substantial negative impact on the probability of being accepted a loan. This implies that different treatment is given to non-natives, particularly to those who were born in a non-European Union country. The findings of this dissertation outline important implications on differential treatment within the consumer lending system, which might prompt for further research and understanding of the lending system.