An equal struggle or a rockier path for some? Assessing the intersectional effects of gender and ethnicity on SME’s multi-hurdled quest for bank financing

Event Date: 29 October 2015

An equal struggle or a rockier path for some?

Assessing the intersectional effects of gender and ethnicity on SME’s multi-hurdled quest for bank financing

Samuel Mwaura and Sara Carter

Brown Bag Seminar, SWD, Room 204

1:00 – 3:30

Abstract

Towards a more discerning assessment of minority disadvantage in enterprise financing, this paper charts a more granular mapping of the different phases the quest for bank financing entails. Using logistic regression analysis, the paper then investigates the extent to which the intersection of gender and ethnicity of the owner-manager is associated with the variability observed between businesses in outcomes and experiences at the different phases of the quest for credit.

While most gender and ethnicity effects dissipate once firm’s structural characteristics are accounted for, our analysis detects several residual intersectional gender and ethnicity effects at the different phases. Compared with White British and Irish males, female ethnic minority owner-managers are more likely to be discouraged borrowers, White women more likely to demand a low amount, while minority males are more likely to be rejected. In line with amount demanded, there are significant differences between White British and Irish women and their male counterparts in the amount of credit supplied. In contrast, while most successful applicants get an within the same band as that applied for, the odds of obtaining an amount of credit that is significantly lower than that applied for are 65% higher for ethnic minority males as compared to White British and Irish males. The lag between application and cleared funds varies from between less than a week to more than four months. Nevertheless, no gender and ethnicity differences are detected in the waiting period.

In all, it would appear that policy needs to be more nuancedly tailored to remedy the different issues encountered by the different groups along the multiphased quest for enterprise financing.

Published: 20 October 2015