Gender Differences in Bank Loan Access: An Empirical Analysis

Abstract

Traditionally female entrepreneurs report difficulties or higher costs in accessing bank credit. These difficulties can be either the result of supply side discrimination, or the lower profitability of female-owned firms than male-owned ones. This paper aims at analyzing the access to credit of small- and medium-sized enterprises (SMEs) owned by women and testing whether firm size is a key element in potential gender differences in obtaining bank loans. We employ a large dataset on SME lines of credit provided by four Italian banks over the period 2005-2007. Estimates show that, after controlling for loan, firm and bank characteristics, female-owned firms: (a) have a lower probability of access to credit; (b) experience a higher probability of having to pledge guarantees than male-owned firms. Moreover, firm size plays a crucial role, as smaller sized female-owned firms are even more disadvantaged in credit access than large-sized female-owned ones. The same result occurs for female-owned firms that are not organized as limited liability companies. The two latter results suggest that, in order to improve their access to bank loans, female-owned firms should pursue a strategy oriented towards expanding their size and increasingly adopting a more structured legal form such as that of limited liability companies.