Change needed to ensure women secure business loans

The research was conducted at the University of Glasgow and the University of Stirling. It aimed to determine the impact of gender on the lending decisions of a UK bank and to study the experience and perception of bank lending of existing business owners of both sexes.

Research was set against a background of public policy initiatives undertaken in the UK in recent years intended to increase female self-employment. Despite these, only 15 per cent of businesses are women-owned and the 26 per cent share of self-employed women has not changed in 15 years. This modest record contrasts sharply with other countries, particularly the USA where female self-employment has risen each year since 1976 and currently stands at a share of 39.6 per cent.

“We thought a fresh study of how gender impacts on the lending decisions of a UK bank was long overdue, particularly in the light of widespread automated credit scoring and over half of all bank employees now being women,” said Professor Fiona Wilson, one of the three researchers who carried out the study. “It's particularly timely, as other recent research has found that female owned businesses pay a 1.1 per cent point premium relative to male owned businesses.”

As a result of the findings, the research team recommend changes are made in training to ensure:

. Bank loan officers and small business advisers advise women business owners to have sufficient capital to start and sustain their businesses.

. The networks used by men and women bank loan officers are similar, as women officers were found to have less effective personal contacts for introducing new business loan applications than their male equivalents.

. All loan officers use the same processes when negotiating credit approval within the bank as women loan officers were found to have less strong internal communications with credit controllers than their male equivalents.

Many banks in the UK regard women-owned businesses as an important market. However, the research suggested that lending decisions by individual bank loan officers can reflect biased gender perceptions and opinions. It also found that bias is just as likely among male and female officers.

Commenting on work carried out with matched pairs of male and female business owners, Professor Wilson said, “Gender really does permeate and affect women's experience of business ownership. Our observations suggest that because of differences in age and industry experience, women can be viewed as possessing significantly less human and social capital prior to setting up their businesses than men.”