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Need a Loan? Sure, Good Lookin'

New research finds the well-documented beauty bonus extends to the world of microfinance.
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(Photo: Dooder/Shutterstock)

(Photo: Dooder/Shutterstock)

Microfinance—the practice of giving small, interest-free loans to budding entrepreneurs in impoverished countries—was once touted as a miracle solution to ending poverty. In recent years, however, skeptical researchers have suggested its effects are overstated at best. But a new paper suggests one specific group of borrowers are disproportionately benefiting from this new form of pseudo-charity: highly attractive ones.

"We find that charitable lenders on a large, peer-to-peer online microfinance website appear to favor more attractive, lighter-skinned, and less-obese borrowers," writes a research team led by the Hong Kong University of Science and Technology's Christina Jenq, the National University of Singapore's Jessica Pan, and Walter Theseira, of Nanyang Techological University in Singapore. "We believe lenders are displaying simple prejudice—explicit or implicit—on the basis of borrower physical traits."*

As we've documented over the years, physically attractive people have significant advantages over the average plebeians; for one thing, they tend to earn more money. This bias has not been a serious issue for traditional charities, which tend to award grants and loans on the basis of need.

"We believe lenders are displaying simple prejudice—explicit or implicit—on the basis of borrower physical traits."

But we're now in the era of microfinance, in which well-intentioned individuals can decide who specifically they would like to help by offering them small loans. In the Journal of Economic Behavior and Organization, Theseira and his colleagues explored whether beauty-based bias was influencing such decisions.

The researchers examined 6,977 loans initially posted on in June 2009—"a typical month of operations from the period where Kiva had already established mainstream status." Kiva, for the uninitiated, was founded in 2005; by 2012, it had facilitated the loan of almost $300 million from nearly 700,000 donors to more than 700,000 borrowers.

Potential recipients are provided with a "loan profile," which includes "a picture of the borrower, a brief biography, loan purpose, loan amount, and repayment schedule," the researchers note.

Theseira and his colleagues report lenders are not entirely irrational. Their analysis found borrowers "who appear more needy, honest, and creditworthy" tend to receive funding more quickly.

"We also find strong evidence that female borrowers are funded faster," the researchers add—a finding that suggests the idea of helping damsels in distress retains its potency.

Most troubling, however, was their key finding that "donors discriminate on the basis of attractiveness, weight, and skin color."

"A one standard deviation increase in assessed attractiveness is associated with a reduction in time to full funding of approximately 11 percent," the researchers write. Looked at another way, "borrowers who are one standard deviation more attractive are treated by the market as though they were asking for $60 less"—a significant difference, given that the average loan amount is around $700.

Not surprisingly, they found "no evidence that borrower physical characteristics significantly predict loan default." They also found that this "attractiveness premium" extended to all economic sectors—not just ones such as retail sales, where appearance could conceivably be an asset.

So we're looking at pure, if presumably unconscious, bias toward attractive people, against those who are heavier or have darker skin tones. The results suggest the beauty premium, which was recently found in a study of restaurant servers' tips, can influence our actions even when the knockout in question is someone we will never meet.

It seems John Keats' famous poem "Ode on a Grecian Urn" was somewhat off the mark: In the deep recesses of our unconscious minds, beauty isn't so much truth as it is deservingness.


Findings is a daily column by Pacific Standard staff writer Tom Jacobs, who scours the psychological-research journals to discover new insights into human behavior, ranging from the origins of our political beliefs to the cultivation of creativity.

*UPDATE — July 31, 2015: This article has been updated to include all three co-authors on the study.