Research has suggested that women entrepreneurs face problems in raising capital as well as getting loans from banks (Blake 2006; Wilson et al. 2007; Prasad 2009). Women face credibility problems when faced by bankers and are less likely to have access to entry into institutional financial networks (Wilson et al. 2007). Women start their business with lower capitalization and lower debt-finance ratio than male-owned business start-ups (Wilson et al. 2007; Prasad 2009). However, there is limited research, which has concentrated on the question of lower capitalization of women-led businesses. Though the nature of difference and the degree of difference in the loan availability to men and women has been established, limited research concentrates on the reason for this discrimination between men and women when the policy strictly suggests that such discrimination is not allowed. A study of 150 businesswomen in the UK showed that 19% of the UK-based women business owners used bank credit to start their business while 32% used their personal savings to start their business (Wilson et al. 2007). Further 16% of the women surveyed believed that they were subjected to “sexual discrimination from banks, not being taken seriously, being patronized or ignored, as bank staff spoke to their partners rather than themselves.” (Wilson et al. 2007, p. 155). However, many researchers suggest that no such discrimination is found in the lending practices of the banks (Fabowale, Orser & Riding 1995; Haynes & Haynes 1999). Therefore, there is a gap in the findings of the researchers and their findings. This paper aims to understand if there exists a gender bias against women in loan approvals and the reason that are said to be the reason for such disapproval of loans to women.
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Therefore, the research question that is studied in the paper is as follows: Are women lenders discriminated against by banks? What are the reasons for such discrimination against women?
The data for the research will be collected by questionnaire survey. The research will be designed into two parts. First, a group of women who had applied for loans would be surveyed and asked questions related to their approval or disapproval of the loan and the reason for the same. Then a group of men who had applied for loans would be surveyed and asked the same set of questions in order to understand the reason for approval or disapproval of their loans. This will provide possible ways that the banks may have used to discriminate against women if there was any discrimination. Further, it will also provide the reason behind the discrimination against women. The further distinction will be made based on the nature of the business and the rate of approval and disapproval of the business.
This research is difficult, as it will take time and effort to find the right sample for the research. The survey will be targeted at men and women entrepreneurs who were willing to cooperate. One possible problem for the research is data collection. The other problem would be to determine the nature of the discrimination. It will be difficult to ascertain if the disapproval of a loan based on technical inadequacy is actually due to gender discrimination.
The research is important due to the increasing number of women entrepreneurs in business around the globe. The number of women in business, as well as women’s participation in business, is increasing and women are emerging as a potent customer segment that needs to be targeted. Evidently, banks have taken the cue and have started many women-oriented loan schemes; still, recent researches suggest the existence of gender discrimination against female loan applicants (Prasad 2009; Wilson et al. 2007). Therefore, it is important to understand the nature of the problem as this may result in a substantial loss of good customers for banks.
Blake, MK 2006, ‘Gendered lending: Gender, context and the rules of business lending ‘, Venture Capital, vol 8, no. 2, pp. 183-201.
Fabowale, L, Orser, B & Riding, A 1995, ‘Gender, structural factors, and credit terms between Canadian small businesses and financial institutions’, Entrepreneurship: Theory and Practice, p. 41–65.
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Haynes, GW & Haynes, DC 1999, ‘The debt structure of small businesses owned by women in 1987 and 1993’, Journal of Small Business Management , vol 37, no. 2, p. 1–19.
Prasad, RM 2009, ‘Loan Hurdles: Do Banks Discriminate Against Women Entrepreneurs?’, Academy of Management Perspectives, vol 23, no. 4, pp. 91-93.
Wilson, F, Carter, S, Tagg, S, Shaw, E & Lam, W 2007, ‘Bank Loan Officers’ Perceptions of Business Owners: The Role of Gender’, British Journal of Management, vol 18, no. 2, pp. 154-171.