Women and Entrepreneurship: Disparities Accessing Credit


Some research shows that women entrepreneurs have difficulties accessing capital and that they have smaller revenues than male-owned businesses. In fact, it has been well documented in the literature that Women-Owned Businesses (WOB) have less access to credit than average, proxied by their access to conventional loans and venture capital (Brush and Gatewood, 2008; Urban Institute, 2008; Robb, 2013). Such differences in access to capital tend to exacerbate among small businesses[1]. For instance, while WOB account for about 30 percent of small businesses in the U.S., they benefit from less than 18 percent of all available conventional small business loans, including SBA loans (Cantwell, 2014). Moreover, recent findings indicate that WOB access less than 8 percent of all available venture capital, with this trend decreasing (Brush and Gatewood, 2008 and Cantwell, 2014).



Gaps in Access to Credit


The observed gaps or inequities in access to credit may be explained for different reasons. One important reason is that WOB are somehow different (and perhaps riskier) than the average business. For instance, WOB are more likely to be very small (i.e. to employ less than five individuals) and to operate in sectors of the economy that are less productive or that display lower levels of growth (Loscocco and Robinson, 1991; Meyer, 2008). Indeed, female entrepreneurs are still more likely to operate in the retail and service sectors (primary in healthcare and education) than in the high-tech and communications sectors (Meyer, 2008; Langowitz, 2003). Furthermore, despite an observed closing in the educational attainment gap between men and women, recent studies have suggested that much of the US gender gap in patenting and high-growth, science-based entrepreneurship, can be attributed to a combination of women’s relatively lower share of postsecondary science, technology, engineering, and mathematics (STEM) degrees (Blume-Kohout, 2014). All these factors above explain while lenders may objectively assess WOB as riskier borrowers (and less credit worthy) than average.


Nevertheless, beyond the fact that the average WOB tend to be less credit worthy than the average firms, previous research has found that some discrimination in the credit market exists by gender and race, even controlling for similar levels of credit worthiness. Asiedu et al. (2012), for instance, using data from the Survey of Small Businesses and Finances (SSBF dataset), found that credit discrimination exists by gender, especially when lenders deal with non-white women.


The authors concluded that such discriminatory practices translated both into higher rates of credit refusal as well as in higher loan interest rates for nonwhite women, compared to the average borrower. This finding is particularly important for small-businesses since minority-owned WOSB between years 1997 and 2013 (especially those owned by African American and Latino women) grew as much as 3 to 5 times faster than the average WOSB (Cantwell, 2014 and American Express OPEN, 2016).


Policy Implications


Controlling for other observable characteristics, WOSBs may be competing in the economic market with relatively less access to credit than the average small business. Consequently, sub-optimal access to these sources of funding may undermine their potential as sources of economic and employment growth. To the extent that this sub-optimal access is not related to intrinsic characteristics of WOSB that make them less credit-worthy or less capable of delivering services properly, such phenomenon can be regarded as a market failure that needs public intervention, and that places WOSB at a clear disadvantage to compete in the economic market.


Furthermore, from a public policy perspective, it is important to assess whether available programs aiming to reduce these gaps need to be revised or complemented. Revision may include interventions designed to change the conscious or unconscious prejudices that prevail in intermediation agents (e.g. lending officers) against the intrinsic capacity of WOBS to perform well and compete in the economic market.

[1] The definition of small business used here (less than 500 employees) is consistent with that established by the US Small Business Administration’s Office of Size Standard.




American Express OPEN. (2016). The 2016 State of Women-Owned Business Report. American Express OPEN.

Asiedu, E., Freeman, J., & Nti-Addae, A. (2012). Access to Credit by Small Businesses: How Relevant Are Race, Ethnicity, and Gender?.

Brush, C., & Gatewood, E. (2008). Women growing businesses: Clearing the hurdles. Business Horizons, 51(3), 175-179. http://dx.doi.org/10.1016/j.bushor.2008.01.007

Cantwell, M. (2014). 21st Century Barriers to Women’s Entrepreneurship. Washington, DC: Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship.

Langowitz, A. (2003). Women in Family-Owned Businesses. Center for Women’s Leadership at Babson College, Raymond Institute.

Loscocco, Karyn A., and Joyce Robinson. 1991. Barriers to women’s small-business success in the United States. Gender & Society 5:511-32.

Meyer, H. (2008). Segmentation and Segregation Patterns of Women-Owned High-Tech Firms in Four Metropolitan Regions in the United States. Regional Studies Association, 42, 1357- 1383.

Robb, A. (2013). Access to Capital among Young Firms, Minority-owned Firms, Women-owned Firms, and High-tech Firms. San Rafael, CA: SBA Office of Advocacy.

Urban Institute. (2008). Competitive Opportunity Gap Analysis. Washington, DC. Retrieved from http://www.urban.org/UploadedPDF/411596_504_gap_analysis.pdf