Women deprived of business loans: Report

Men are more likely to get their hand on business loans in comparison to women, putting the gender at a disadvantage in entrepreneurship.

This is according to data from a new paper by the Kenya Bankers Association (KBA), tabled at the 10th Annual KBA Banking Research Conference on Wednesday.

The paper delves into the drivers of credit choices by micro, small and medium enterprises (MSMEs) and the utilization of business versus personal loan accounts.

Findings from the paper have established that men use their business accounts more than women do, implying that women remain disadvantaged in accessing business loans.

This means that women are likely to use their personal loan accounts to access credit for their business, which translates to a more expensive venture.

For instance, the amount drawn from a business loan account is usually higher as business expenses are usually bigger in size.

Business loans are however complex in nature as they almost require collateral at all time and feature an added layer of qualification in contrast to personal loans.

On the flip side, while personal loans are easier to obtain and are usually largely unsecured, the credit line is accompanied by high interest rates and features a relatively shorter tenure to maturity.

The paper laid at the bankers conference further established that the turnover of businesses affect the choice of borrowing, where to borrow and what type of loan to pursue, but with surprising results where SMEs with great turnovers (above Ksh.500,000) opt for personal over business accounts to take loans.

Businesses with long term view are meanwhile attractive to long term funders such as banks while registered SMEs have an easier access to business loans unlike their unregistered peers.

The paper authored by the KBA Center for Research on Financial Markets and Policy breaks down the decision to borrow, what entity to borrow from and the choice of loan account to use.

This by a variety of variables including by age of enterprise, gender, risk preference, industry, turnover, education of the proprietor and registration status.