LSE’s Grace Lordon explores the gender gap that exists in trade finance, examining why it exists and how it might be overcome.
Associate Professor in Behavioural Science, London School of Economics
Managing Director, Behavioural Science at Work
I teach executive courses at the London School of Economics as well as in various corporate settings. In addition to the courses on high stakes decision making focusing on capital structure, behavioural risk, and general conduct, I often cover diversity and inclusion. This is because who we choose to hire in an organisation determines its future success.
As someone whose research is interested in understanding why people choose the occupations that they do, trade finance is particularly interesting. Looking at it from the outside in, a few stylised facts are highly relevant. Since the 1970’s women have chosen to converge into many occupations that were previously dominated by men, such as accounting and law, but not others, like the STEM professions. Finance is somewhere in between. However, within finance, there is notable segregation by speciality, with trade finance being one of the most male dominated of the specialities. I would argue that we should care about the representation of women in trade finance beyond what it means for the individual themselves. Trade finance professionals provide an invaluable service to the economy, where a large proportion of potential customers are females. I emphasise potential as the share of females actually accessing trade finance is also disproportionately low.
So, to begin with, we have a low proportion of women in trade finance. On top of that, those women that do enter the trade finance space experience a lower level of attainment on certain key outcomes, such as the propensity to get promoted and wages earned per hour. The question is why?
space experience a lower level of attainment on certain key outcomes, such as the propensity to get promoted and wages earned per hour. The question is why?
Like all other social phenomenon, there are a number of competing hypotheses. These include, among others: statistical discrimination, taste discrimination, and the working environment. However, an often overlooked hypothesis is that differences in male and female personalities impact labour market outcomes in trade finance. Research shows that the average female is more risk-averse, less competitive, more keen to avoid uncertainty, less extrinsically motivated, and are more cooperative. Some of these traits are clearly associated with higher rewards in trade finance jobs. Do note that these are not bad traits; in many instances, they are likely to be preferred. However, we often encourage females to adopt “male” traits in order to give them an advantage at work. I have seen this articulated in training courses in big firms and written in career development reviews.
Is it rational to adapt different behaviours at work to succeed? The evidence suggests that it is not. Overall it suggests that females who do adopt “male” traits suffer a backlash since both men and women have certain expectations about how women should act. When behaviour is outside of these norms, it is often not welcomed. To the extent that trade finance continues to reward these traits that are over-represented in males, the job will always have more males. It is worth re-assessing whether male traits like this should be valued so highly. Often the value placed on these traits is unconscious. If the industry becomes aware of this subconscious bias, and works to overcome it in hiring and promotion decisions, we should see progress.
Firms looking to rock the boat even more should look for entry level talent outside of traditional economics and finance degrees, and place more value on non-cognitive skills and the hard skills necessary for the tasks within the job a new hire will do. These skills can be assessed prior to interview, allowing a more objective recruitment process and the prospect of hiring from broader pools of talent.
Moving forward, some of the challenges of hiring and retaining women can be informed by methods in behavioural science. Not all jobs can be filled with a blind recruitment process, like those in symphony orchestras. Nevertheless, there is a lot that can be done. More encouragingly, if done well, behavioural insights are cheap and allow organizations to definitively determine what did and did not work. Such insights allow firms to avoid continued investments into costly interventions that suck up time and money for little or no return.
Read this full issue of Trade Finance Talks, free
This article was part of TFG’s third issue of Trade Finance Talks: Trade Wars & Tradetech, launched at Sibos 2019. This free issue gets into the detail of trade wars, trade flows and geopolitics, as well as looking at how digitisation and fintech is bridging the trade finance gap. You can read the full edition for free here.