It’s no secret that women in developing countries struggle to gain access to money and credit. It’s a favourite talking point for U.S. Secretary of State Hillary Clinton.
To cope, in many countries there are microfinancing organizations that cater specifically to women. But what about in developed countries? In Western Europe? In North America?
Do banks systematically discriminate against businesses that are run by women? Why? What can an enterprising businesswoman do to get equal access to resources?
The questions, as is so often true when it comes to proper research, are more straightforward than the answers.
Many of the credit difficulties faced by women in developed countries are compounded in the developing world. CanadaInAfghanistan/Flickr
A 2010 study found that in Italy, women do indeed have more difficulty accessing credit. A robust dataset revealed that women are 5.2% more likely to have to pledge collateral, and are 4% more likely to be levied fines for overdrawing.
Interest rates, which are centralized at bank headquarters and not subject to the whims of individual loan officers, don’t vary significantly between Italian women and men.
The picture in the United States, however, is entirely different. Using data from the 1998 National Survey of Small Business Finance, and controlling for other demographic and financial characteristics, researchers found no discernible gender differences for loan approval and interest rates.
In fact, the 1998 study found that in concentrated credit markets—those where dense populations and/or high industrial competition cause both very high and very diversified demand for financing—women actually receive preferential treatment from lenders.
Unfortunately, inconsistent conclusions and conflicting opinions make it difficult to shape a loan procurement strategy based on your own gender. A more promising solution is to select the gender of your loan officer.
Access to capital is critical for business success.
A 2007 study in the UK found that the relative weights that bankers assign to various assessment criteria varies based on their own gender.
- Female loan officers place greater importance on procedural and business elements of applications.
- Male officers rely more on the applicant’s negotiating skills and decision-making strategies.
- Having the same gender as your loan officer—whether you’re male or female—was shown to consistently improve your chances of being approved.
So while group statistics can’t always be applied to individual cases, you can use them to try improving your odds.
If you’re a man applying for a small business loan, consider speaking to a male banker, and make sure you’ve refined your negotiating skills and managerial style.
If you’re a women applying for a small business loan, consider speaking to a female banker, and make sure the fundamentals of your business are sound.
The ugly remnants of discrimination are going to take decades to fizzle out completely. In the meantime, understanding what discrimination looks like, and being able to sidestep it advantageously, should help your business be more competitive in the real world.
Source: Bellucci, A., Borisov, A., & Zazzaro, A. (2010). “Does gender matter in bank-firm relationships? Evidence from small business lending.” Journal of Banking & Finance 34. 2968–2984.