Why are female small business owners in the United States less likely to apply for bank loans than their male counterparts?
Female business owners are more likely to be discouraged from applying for a bank loan compared to male business owners because they fear that their application will be rejected. Analyzing data from three ‘Surveys of Small Business Finances,’ our study examines the likely reasons why they are discouraged. Using the maximum likelihood approach, we estimate the probability of loan denial. We found evidence of bank discrimination against female-owned businesses, which in turn prevents women entrepreneurs applying for credit (feedback effect). We recommend that further investigation of this feedback effect of loan denial on business owners’ decision-making process be undertaken.Read More