Skin Tone Bias in Crowdfunded Microlending

Abstract

Entrepreneurs of color often face discrimination when seeking financial capital. The literature, however, is devoid of theory on how biases surrounding skin color per se shape access to capital, with most research focusing on racial categorization (e.g., White versus non-White). We explore the role of colorism—a form of bias based on skin color, irrespective of race. We leverage theory on colorism, which is closely linked to theory on social status, to develop arguments concerning how entrepreneur skin color influences microloan funding. We then examine how two strategies commonly used for attracting funds in prosocial domains—use of negative language and personal disclosure—act as moderators of the colorism-funding relationship. Results indicate that entrepreneurs with very dark skin color and those with very light skin color face worse funding prospects compared to those with moderate skin darkness. Use of negative language exacerbates the influence of skin color, thereby challenging the notion the negatively framed appeals are an effective strategy for driving funds to prosocial causes. Personal self-disclosure, however, mitigates the influence of skin color. Broadly, we advance research on bias and discrimination against entrepreneurs of color, while drawing attention to the inherent, setting-driven complexity of colorism.