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Finance After Hours: A Case Study in Women’s Access to Capital

Chinese banks may have gender-neutral formal criteria for lending, but still have very few loans to women.  This situation is illustrated and analyzed in my new case, “Finance After Hours:  A Case Study in Women’s Access to Capital,” released today and downloadable here. The case, co-authored with Dr. Jiafei Jin of Southwestern University of Finance and Economics, is based on research conducted recently in China. The case will be taught for the first time at Power Shift next week.

In China today, more than 70% of startups are owned by women.  However, few grow to be sizable businesses and women owners say the reason is lack of access to capital. The bank featured in the case has only 10% of its loans invested in women-owned businesses, but insists that it has gender-neutral criteria for lending.  The explanation offered is that women simply don’t apply to them for credit. The existing 10% in the portfolio are all women who inherited an existing business–and its banking relationship–from their fathers.

However, the quotations from interviews also show that the bankers have strong opinions about the creditworthiness of female entrepreneurs, despite their assertions that such applicants never come to the bank.  These opinions range from expectations that women won’t be serious about business because of family demands to complaints that women are too picky about interest rates. There are also strategic decisions being made by the bank that avoid lending to industries where large numbers of women are owners.

Interviews among female entrepreneurs at a “nearby” business school (actual interviews were conducted at two large Chinese universities with entrepreneurship programs) say they don’t apply to for bank loans because:

  1. bankers treat them dismissively

  2. banks expect them to spend many evenings at long, boozy dinners followed by Karaoke and “other activities”

  3. banks will want to control their businesses.

The case thus explores the way that informal barriers, social practices, and cultural precepts operate to limit women’s access to credit even where formal guarantees of equal treatment are in place.  Thus, it is the external backdrop (the “after hours” world) that acts as the real constraint.

An important aspect of the case, however, is to show that many of the informal circumstances are uncomfortable for the men as well as the women.  Male bankers, for instance, don’t necessarily want to spend every night of the week partying with clients and they worry about the impact of this lifestyle on their families.

My hope is that the case will show how difficult it is to sort through the complex pressures on individuals and institutions that form the basis for the gender gap, even when the parties involved intend to be fair.

The research for this case study was funded by Southwestern University of Finance and Economics, Chengdu, China.

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