Gender and the credit rationing of small businesses

Rapid small business ownership growth rates among women have motivated research on issues related to gender and small business performance. The importance of credit access for the success of small businesses, as well as evidence that women have less access to credit than male business owners, has led researchers to explore the reasons for this. In this paper, we estimate a model of credit rationing by gender of the business owner. Our results are consistent with previous studies that find higher loan denial rates and lower loan application rates among women compared with men. Testing the robustness of the results we find that women seem to be rationing themselves in the credit market rather than being discriminated against by banks. Reasons for this self-rationing behavior are an important topic for further research.

► We analyze credit rationing of small businesses to address a research question whether or not loan denial (type 2 credit rationing) differs by the gender of the business owner.
► We use data from the 2003 Survey of Small Business Finances and include discouraged borrowers in our analysis.
► Our results show that women business owners do indeed have higher loan denial rates and lower loan application rates than their male counterparts.