Measuring applicant quality to detect discrimination in peer-to-peer lending

We measure the quality of applications for online peer-to-peer lending in Germany and relate it to gender discrimination. The data context allows summarizing application quality as a single numeric measure, the expected internal rate of return. The measure serves as a control variable and is interacted with the applicants' gender. We find that women enjoy higher funding rates than men, mainly because they are less punished when they offer a low application quality. The evidence is consistent with the hypothesis that the predominantly male lenders have a less precise understanding of women's applications than of men’s applications.