The gender gap in bank credit access (original) (raw)
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Definitions Matter: Measuring Gender Gaps in Firms' Access to Credit
Enterprise Survey do not support the existence of a gender gap in access to finance in the Latin American and Caribbean region. Nonetheless, more precise measures show that women-led businesses are more likely to be financially constrained than other comparable firms. The evidence presented herein suggests that this gender gap may be driven by taste-based discrimination. This paper exploits a rich dataset that provides detailed information about female ownership and management in firms, allowing for further understanding of gender gaps in access to finance. JEL Codes: G21; J16; O54.
Gender Differences in Bank Loan Access: An Empirical Analysis
SSRN Electronic Journal, 2000
Traditionally, female entrepreneurs report either difficulties or higher costs in accessing bank credit. These problems can be either the result of supply-side discrimination, or differences in profitability between female-and male-owned firms. This paper aims at analysing whether these differences are statistically significant in the case of Italian firms by means of a large dataset on lines of credit provided by three Italian banks over the period [2005][2006][2007][2008]. Descriptive statistics show that female-owned firms are significantly smaller and younger than male-owned ones, and have-on average-a larger, but shorter, number of lending relationships. Additionally, the mean size of loans requested by female-owned firms is smaller, and more frequently assisted with collateral, personal guarantees, or both. After controlling for loan, firm and bank characteristics, estimates show that gender does not affect the likelihood of obtaining a bank loan. However, in the case of female-owned firms, guarantees are less powerful instruments in gaining access to credit and the probability of having to pledge collateral is higher than for male-owned firms. Our findings suggest that differences in credit access are the result of discrimination and structural differences between male-and female-owned firms. Policies designed to improve the We thank Rebel Cole, Jose Liberti, Geoffrey Hirth, Rosa Ferrer, and participants to the Stockholm EALE 2012 and to the Chicago MFA 2013, two anonymous referees, the editor Alberto Zazzaro, for useful comments and suggestions on the earlier version of this article. All remaining errors are ours. access of female-owned firms to bank loans should favor an increase in firm size that is often associated with the adoption of more sophisticated business legal structures.
Women-led Firms and Credit Access. A Gendered Story?
Italian Economic Journal, 2022
This work focuses on credit access and demand in Italian firms using the RIL dataset, a sample representative of Italian firms, for the year 2015. We investigate whether the gender of the firm’s decision-maker plays a role in requesting and obtaining a loan. Our results suggest that women are significantly less likely to ask for credit, while no significant differences in credit approval are found between the two genders. Moreover, the gender gap disappears for more educated women, as well as for firms in the north of the country.
Gender, Credit, and Firm Outcomes
SSRN Electronic Journal, 2019
Small and micro enterprises are usually majority-owned by entrepreneurs. Using a unique sample of loan applications from such firms, we study the role of owners' gender in bank credit decisions and post-credit-decision firm outcomes. We find that, ceteris paribus, female entrepreneurs are more prudent loan applicants than are males, since they are less likely to apply for credit or to default after loan origination. The relatively more aggressive behavior of male applicants pays off, however, in terms of higher average firm performance after loan origination.
Discrimination against women in formal credit markets: Reality or rhetoric
World Development, 1994
Microenterprises receive several forms of aid; however, many are denied access to formal finance. It is often argued that women entrepreneurs are frequently discriminated against in formal credit markets, but these arguments are often based on rhetoric and advocacy rather than rigorous analysis. In this study, the results of a multinomial logit model show that although a smaller total number of women than men entrepreneurs applied for loans, women entrepreneurs represent a higher proportion of applicants. Interestingly, the small probabilities of both male and female entrepreneurs being quantity rationed implies that this form of credit rationing is not widely exercised in special microenterprise programs in Ecuador.
SSRN Electronic Journal, 2000
In this study, we analyze differences by gender in the ownership of privately held U.S. firms and examine the role of gender in the availability of credit. Using data from the nationally representative Surveys of Small Business Finances, which span a period of sixteen years, we document a series of empirical regularities regarding male-and female-owned firms. Looking at the differences by gender, we find that female-owned firms are 1) significantly smaller, as measured by sales, assets, and employment; 2) younger, as measured by age of the firm; 3) more likely to be organized as proprietorships and less as corporations; 4) more likely to be in retail trade and business services and less likely to be in construction, secondary manufacturing, and wholesale trade; and 5) inclined to have fewer and shorter banking relationships. Moreover, female owners are significantly younger, less experienced, and not as well educated. We also find strong univariate evidence of differences in the availability of credit to male-and femaleowned firms. More specifically, female-owned firms are significantly more likely to be credit constrained because they are more likely to be discouraged from applying for credit and more likely to be denied credit when they do apply. However, these differences are rendered insignificant in a multivariate setting, where we control for other firm and owner characteristics. These results indicate that disparity in credit market outcomes by gender are not likely to be caused by taste-based discrimination.
Does gender matter in bank-firm relationships? Evidence from small business lending
Journal of Banking & Finance, 2010
In this paper we study the relevance of the gender of the contracting parties involved in lending. We show that female entrepreneurs face tighter access to credit, even though they do not pay higher interest rates. The effect is independent of the information available about the borrower and holds if we control for unobservable individual effects. The gender of the loan officer is also important: we find that female officers are more risk-averse or less self-confident than male officers as they tend to restrict credit availability to new, unestablished borrowers more than their male counterparts. JEL Classification: G21; G32; J16
Credit Access for Female Firms: Evidence from a Survey on European SMEs
SSRN Electronic Journal, 2000
This paper uses ECB survey data to assess whether gender matters in the small firms' financial structure and access to credit. Firms owned or managed by women (female firms) use smaller amounts and less heterogeneous sources of external finance than their male counterparts. According to statistical evidence, female firms have difficulty in accessing bank finance: on the demand side, they apply for bank loans less frequently, as they more often anticipate a rejection; on the supply side, they experience a higher rejection rate. Econometric analysis shows that these different patterns are largely explained by the characteristics (such as business size, age and sector of activity) that make female firms structurally different from those led by men, without leaving room for a significant gender effect. An additional contribution of this paper is to compare the major euro-area countries within a homogeneous framework: weak evidence of gender discrimination appears in the supply of bank loans in Germany, Italy and Spain, while some demand obstacles arise in France.
Understanding Structural Barriers & Hidden Bias in Access to Credit for Women-Led Businesses
2018
No Direct Hidden Bias-Hidden Bias Operates Through Many Factors 21 Perception Matters 23 Few Applicants Were O ered Loans And Fewer With Terms They Wanted 26 Variation In Lending Practices Between Banks 26 Financial Education Has The Potential To Level The Playing Field 28 What Can Financial Institutions Do? 29 What Can Policymakers Do? 30 Recommendations 29 Guatemala Pilot Methodology 32 Methodological Limitations And Challenges 34 Considerations For Future Use 35 Testing Tools 35 Annex 1: Guidance For Implementing Biass Self-assessments 31 4 Women-led businesses are an important vehicle for enhancing women's economic opportunities and agency, and o en lead to poverty reduction and economic growth. However, structural barriers prevent women from scaling their enterprises by limiting their access to the financial, physical, human, and social capital required to succeed. Approximately 70% of the world's women-led small and medium enterprises (SMEs) do not have access to finance or lack the amount of finance needed to grow. Gender gaps in access to formal credit is one of the principal barriers impeding women-led businesses from exploiting their full potential and economic opportunities. There are many structural barriers holding women back from accessing the resources needed to grow their businesses. However, one less explored (and more di icult to assess) challenge in emerging markets is that of hidden gender and ethnic biases in the financial system. This report, designed for international development organizations, governments, and financial institutions, does the following: 1) highlights the key barriers facing women-led small enterprises across the developing world; 2) identifies how hidden gender and ethnic biases impact the growth of women-led businesses; 3) presents the results of a pilot case study in Guatemala inspired by a novel methodology, first applied to mortgage lending in the United States, that seeks to test for bias in bank-lending decisions for small enterprises; and 4) provides recommendations for policymakers and financial institutions on how this methodology can be applied in developing countries. Oxfam commissioned Babson College in 2016 to conduct a pilot study in Guatemala about hidden gender and ethnic bias in access to bank credit. The study employed a "matched-control" mystery shopper research methodology to assess whether customer service and financial access were similar across demographic categories. To our knowledge, it is the first time this type of methodology has been implemented in a developing country. The goal of this pilot was to test this methodology for identifying hidden bias in financial institutions' lending practices in Guatemala and to make the tool and the lessons from this pilot available for policymakers and financial institutions in developing countries. The main lessons from the pilot study were twofold. First, perceptions of bias do not necessarily align with results on hidden bias on loan terms. While the study did not find any direct evidence of hidden bias in the loan application process, likely due to a number of key factors, it did, however, find that most bank loan customers perceive gender and ethnic bias, which suggests a problem specific to how banks communicate their willingness and interest to lend to women and indigenous groups. Further, hidden bias against women and indigenous people is likely to also operate through the structural barriers outlined above which were accounted for in the control variables. In other words, the study sample purposively selected men and women entrepreneurs who had already reached similar levels of growth in their businesses; for women and indigenous people in the sample in particular, this means that they likely had overcome some of the structural barriers that many of their counterparts still deal with on a daily basis. Second, methodological factors, such as controlling for all the di erent variables that may a ect credit decisions by financial institutions, can a ect the identification of direct gender and ethnic bias. The report concludes by providing a set of recommendations for financial institutions and policymakers looking to employ a mystery shopper matched-control methodology, as well as for those interested in ensuring that financial services reflect the needs and preferences of women and women-led businesses.
Entrepreneurship Theory and Practice, 2007
Previous research provides unequivocal evidence that women-owned businesses start with both lower levels of overall capitalization and lower ratios of debt finance. Structural dissimilarities between male-owned and female-owned businesses explain most, but by no means all, of these contrasting funding profiles. Explanations of residual differences, viewed in terms of supply-side discrimination or demand-side debt and risk aversion, remain controversial. Using experimental and qualitative methodologies, this study explores the role of gender in bank lending decisions, focusing on the criteria and processes used by male and female loan officers. Results reveal similarities in the criteria used to assess male and female applicants but show modest differences in the emphasis given to certain criteria by male and female lending officers. The processes used by male and female lending officers to negotiate loan applications revealed the greatest differences.