The Myth of Female Credit Discrimination in African Manufacturing

Abstract

We examine credit constraint differentials between male and female manufacturing entrepreneurs using firm data from 16 sub-Saharan Africa countries. Small enterprises owned by female entrepreneurs are less likely to be credit constrained compared to their male counterparts, while this is reversed for medium-sized enterprises. A generalised Oaxaca–Blinder decomposition shows that the gap is predominantly a pure gender effect. We argue that this finding is mainly due to female favouritism in loans to micro and small firms because the gap is reversed for medium-sized enterprises and because we find no sign of superior female entrepreneurial performance in observable indicators.

Acknowledgements

We are grateful for research assistance from Andreas Bjørnsson. A previous version of the article was entitled ‘Another perspective on gender specific access to credit in Africa’. The article was partly written while Henrik Hansen was a Visiting Professor at the Division of Nutrition, Cornell University. The hospitality of the division and, in particular, of Per Pinstrup-Andersen is gratefully acknowledged. The article was prepared as part of a research grant provided by Danida to support collaborative research under the World Bank research programme ‘Economic Development and Structural Change’. We wish to thank a referee for very useful comments. The usual caveats apply.

Notes

^1. The latter restriction excludes Burkina Faso (51 observations) and Rwanda (59 observations) from the sample.

^2. We document results both with and without weights for two reasons. Frist, missing survey weights were encountered for several firms for Kenya, Nigeria and South Africa. These missing observations were imputed using survey weight information for firms operating in the same location and sector. Second, we question the reliability of available enterprise census data from which the individual country survey weights have been calculated (ee, for example, DNEAP [2006] in the case of Mozambique).

^3. Firms are defined as having formal credit demand if they (1) already have debt (formal or informal), (2) have applied for a loan and (3) did not answer ‘do not need a loan’ in the ‘why did you not apply’ section in Table 1.

^4. Including the profit rate as a credit constraint determinant does not change the results reported.

^5. The World Bank SME Department operates with three groups of small- and medium-sized enterprises: micro-, small- and medium-scale firms. Micro firms have up to 10 employees, small enterprises up to 50 employees, and medium companies up to 300 employees.

^6. Market intelligence refers to (1) the ability of managers/owners to communicate and interact efficiently with suppliers and buyers, (2) knowledge of where to position the firm in relation to existing distribution networks and how to develop new distribution channels, (3) ability to create a well-organised and efficient working groups, and so forth. See Sutton (2005) and Bigsten and Söderbom (2011) for references.

^7. However Berge et al. (2011) do find positive effects of business training for male entrepreneurs.