Discrimination in credit markets: The Case of female entrepreneurs in India

Despite impressive growth performance, empowering women and bridging gender gaps in entrepreneurship remains a key challenge for India. Given the crucial role of finance functioning of businesses, we investigate whether females face disproportionate barriers in seeking and receiving loans. Using nationally representative datasets from the World Banks's World Enterprise survey (WBES) data for 2014 and 2022, we analyse the role of manager's and owner's gender in the loan seeking behaviour and loan approval rate. On the demand side, we find that female managers are less likely to seek loans while female owners are more likely to seek loans. Particularly, female managed firms even with male owners are less likely to seek loans while male managed firms with female owners are more likely to apply for loan. On the supply side, we find that loans of female managed firms are less likely to be approved whereas female owned firms do not have significantly less chances of loan approval. Interestingly, the female owned firms with male managers do not face any significant chance of loan denial but male owned firms with female managers have higher and significant chances of loan denial. Female owned and female managed firms also have lower chances of loan approval.