Gender, Credit, and Firm Outcomes

Abstract

Is there a gender gap in credit demand or credit supply affecting firm performance? Using a unique sample of loan applications by small and micro enterprises, we find that, ceteris paribus, female entrepreneurs are more prudent loan applicants, who are less likely to apply (or reapply) for credit, and less likely to default after loan origination. However, more proactive behavior of male applicants pays off, yielding higher average firm performance after loan origination. We show that most of the performance gap between small male- and female-owned firms is attributed to the identified gender differences in credit demand.

Keywords: Gender, Loan applications, Bank’s credit decision, Firm profitability and default

JEL Classification: G21, G32, J16