Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns

Suresh de Mel (), David McKenzie and Christopher Woodruff

No 3743, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In a recent randomized experiment we found mean returns to capital of between 5 and 6 percent per month in Sri Lankan microenterprises, much higher than market interest rates. But returns were found to be much higher among men than among women, and indeed were not different from zero for women. In this paper, we explore different explanations for the lower returns among female owners. We find no evidence that the gender gap is explained by differences in ability, risk aversion, or entrepreneurial attitudes. Nor do we find that differential access to unpaid family labor or social constraints limiting sales to local areas are important. We do find evidence that women invested the grants differently from men. A smaller share of the smaller grants remained in the female-owned enterprises, and men were more likely to spend the grant on working capital and women on equipment. We also find that the gender gap is largest when we compare male-dominated sectors to female-dominated sectors, although female returns are lower than male returns even for females working in the same industries as men. We then examine the heterogeneity of returns to determine whether any group of businesses owned by women benefit from easing capital constraints. The results suggest there is a large group of high-return male owners and smaller group of poor, high-ability, female owners who might benefit from more access to capital.

Keywords: microfinance; gender; microenterprises; randomized experiment (search for similar items in EconPapers)
JEL-codes: C93 O12 O16 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2008-10
New Economics Papers: this item is included in nep-dev, nep-ent, nep-exp, nep-lab and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published - published in: American Economic Journal: Applied Economics, 2009, 1(3), 1-32

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Journal Article: Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns (2009)
Working Paper: Are women more credit constrained ? experimental evidence on gender and microenterprise returns (2008)
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