Women deprived of trade credit: report
Men are more likely to get business loans than women, which puts gender at a disadvantage in entrepreneurship.
That’s according to data from a new paper from the Kenya Bankers Association (KBA), presented at the 10th annual KBA Banking Research conference on Wednesday.
The paper examines the drivers of credit choices by micro, small and medium enterprises (MSMEs) and the use of business loan accounts versus personal loan accounts.
The results of the paper established that men use their business accounts more than women, implying that women remain at a disadvantage in accessing business loans.
This means that women are likely to use their personal loan accounts to access credit for their business, resulting in a more expensive business.
For example, the amount drawn from a business loan account is usually higher because business expenses are usually higher.
Business loans, however, are complex in nature as they almost require collateral at all times and come with an extra layer of qualification compared to personal loans.
On the other hand, while personal loans are easier to obtain and are generally largely unsecured, the line of credit comes with high interest rates and a relatively shorter term to maturity.
The article presented at the Bankers’ Conference further established that corporate turnover affects the choice of borrowing, where to borrow and what type of loan to pursue, but with surprising results when SMEs with a significant turnover (over 500,000 Ksh) opt for personal financing. business accounts for taking out loans.
Firms with a long-term view are attractive to long-term lenders such as banks, while registered SMEs have easier access to business loans than their unregistered peers.
The article by the KBA Center for Research on Financial Markets and Policy breaks down the decision to borrow, the entity from which to borrow, and the choice of which loan account to use.
This by a variety of variables including age of business, gender, risk preference, industry, revenue, owner’s education and registration status.
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