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Firm characteristics and asymmetric information based credit rationing in an emerging economy: a gender perspective

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Abstract

Micro, Small and Medium firms’ credit access remains a dilemma though the financial sector has been liberalized. This paper investigates the factors influencing credit rationing and how variations in the characteristics of firms owned by different genders contribute to credit rationing. The study utilizes probit estimation with marginal effects, Fairlie counterfactual and decomposition analysis to analyze both credit rationing and the extent to which the credit rationing gap is influenced by differences in gender endowments and discrimination using 1,430 firms’ owners’ loan applications randomly selected from eight (8) commercial banks. Our results show that borrowers having more years of experience, external market access, proximity to lender, being older and being male are not likely to experience credit rationing. Borrowers in the agricultural sector, with long term loans, who lack formal education, run labor-intensive firms, have joint ownership, and operate small businesses face the probability of being credit rationed. A decomposition and counterfactual analysis reveal a credit rationing gap largely influenced by discrimination favoring male owned firms rather than differences in gender endowments. Our findings have implications for policy.

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Authors declare that the data used for the research is readily available and shall be made available upon request.

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Acknowledgements

We wish to acknowledge the credit officers of the GCB Bank, the National Investment Bank, Ecobank Ghana, Fidelity Bank, SGSSB Bank, UMB Bank, Standard Chartered Bank and the Republic Bank for assisting authors in obtaining the information used for our data curation.

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Authors did not receive any funding for this research.

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Authors and Affiliations

  1. Department of Economics, Ghana Communication Technology University, PMB 100, Accra, Ghana

    Frank Gyimah Sackey, Richard Kofi Asravor & Isaac Ankrah

  2. The Nordic Africa Institute, Uppsala, Sweden

    Emmanuel Orkoh

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  1. Frank Gyimah Sackey
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  2. Richard Kofi Asravor
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  3. Emmanuel Orkoh
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  4. Isaac Ankrah
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Contributions

FGS is the corresponding and was responsible for the conceptualization of the paper, data curation and estimation of the data. RA is responsible for the formal analysis, methodology and discussion of results. EO is responsible for the summary, conclusion and editing of the paper. IA is responsible for theoretical and empirical literature review of the paper. All authors read and approved the final manuscript for submission.

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Correspondence to Frank Gyimah Sackey.

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Sackey, F.G., Asravor, R.K., Orkoh, E. et al. Firm characteristics and asymmetric information based credit rationing in an emerging economy: a gender perspective. J Glob Entrepr Res 13, 19 (2023). https://doi.org/10.1007/s40497-023-00363-3

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