Are women entrepreneurs treated differently when they access credit?


THERE are two ways to look at this question. 

First, are women entrepreneurs discriminated against when they apply for funding from lending institutions? 

The jury is still out on this one as numerous studies in different countries have failed to reach consensus. 

This is partly due to the fact that unless the researcher is present throughout the lending interview process it would be difficult to claim unfair treatment. 

Some researchers have found that because of socialisation, some women may just not have the social skills and confidence required to convince a lending officer in the same way a man might be able to. 

There are also a host of other risk factors which a bank takes into account before approving a facility, making it difficult to isolate specific issues. 

However, before we let the banks off the hook entirely, a closer look will show why women will tend to score poorly on the various criteria used to consider lending. 

Some interesting points were made by Marlow and Patton of Baylor University (US) in a 2005 paper: Many women are employed before they decide to start their own business.

Because they tend to be employed in lower paying jobs or to interrupt their careers for various reasons, they are more likely to have less personal savings than men. 

Personal savings are the primary source of funding for a business start-up and can also serve as security for a bank loan.

Under-capitalisation, which many women-owned businesses suffer from, is known to be one of the main reasons for business failure.

Furthermore, women are less likely to have a credit track record and they tend to start new small businesses in saturated industries, usually services. 

In summary, because banks are commercial entities they will rightly minimise their exposure to such applicants with “limited education, experience and low proposed equity.” 

The authors also cite other research which showed that the women in the sample did not have a problem with loan officers at all – only because they hardly applied for loans, assuming they wouldn’t be approved anyway!

To be fair to the banks, when it comes to lending to women, there are clearly some issues which put women on the back foot and these have more to do with our society than with their lending policies. 

Marlow and Patton noted that we all “do gender”, even when one decides to assume the roles and characteristics of the opposite sex, it’s still “doing gender.”      

The second way of looking at this question is whether it’s possible to treat women borrowers differently by relaxing standard lending criteria. 

The answer is yes. 

Enter Professor Muhammad Yunus, founder of Grameen Bank in Bangladesh (, who were awarded the 2006 Nobel Peace Prize for economic and social development. 

Grameen Bank is unlike any that I have heard of. 

It has 8.36 million borrowers, 97 percent of them women, the loans are unsecured and there is no legal instrument, that is, written contract. 

You may be thinking they never get a cent back – on the contrary, the bank has a 97 percent repayment rate and is profitable.

Borrowers are put into groups of five and a system of peer pressure ensures repayment.

The only requirement on being granted a loan is that the borrower must recite a declaration known as “The Sixteen Decisions”.  

They are value-based, one of them says: “We shall grow vegetables all year round.  We shall eat plenty of them and sell the surplus”.  The bank, whose tagline is: “Bank for the poor” even lends to beggars!

It has been credited with a higher school enrolment rate and a general improvement in the lives of Bangladesh’s rural poor.  

I acknowledge that women do not experience “gender discrimination” in the same way and there is a new breed of women entrepreneurs who have most of the resources required to give their businesses a good chance of success. 

But these are in the minority and maybe it’s time lending institutions started looking at innovative ways to facilitate access to credit for women. 

To do that and keep the shareholders happy, therein lies the challenge.


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