Gender discrimination in access to capital: Experimental evidence from Ethiopian SGBs

Project Active from to Firms and Trade

Access to capital is widely considered a key accelerator for business productivity and growth. Gender discrimination against entrepreneurs, who form the largest sector of the labor force in sub-Saharan Africa, may drive gender gaps in access to capital and subsequently reduce the performance of female-owned businesses. This raises concerns about both gender equity and economic growth. Due to discrimination, capital may not be allocated to the most productive businesses, which would, in turn, reduce economic growth. Using a randomised experiment, we identify whether financial providers discriminate against female entrepreneurs when evaluating their business' productivity. We then study the implications of discrimination for financial providers' ability to "pick winners" and successfully allocate capital to the most productive businesses.

This project is implemented as a partnership between researchers at Washington State University, UC Merced, and the Entrepreneurship Development Center (EDC) in Ethiopia, the key agency tasked by the government to increase entrepreneurship. Gender discrimination among financial providers may be a major barrier to facilitating capital access for women entrepreneurs, and if so, it is critical to identify and address it.

The findings of this study will be helpful for designing future interventions to promote access to capital. If we document gender discrimination among loan officers and the mechanisms underlying it, EDC will be well placed to design training programs and materials to address discrimination and influence policy regarding financial providers. Alternatively, if we do not find evidence of gender discrimination among financial providers, we can use our data to identify other barriers that female entrepreneurs face, and EDC can incorporate that knowledge into their business training programs and initiatives for increased financial access.