Access to finance is essential for firm growth, but women-led businesses often face significant demand-side and supply-side barriers to access. This column presents an analysis of World Bank Enterprise Survey data from 61 countries. While women-managed firms are equally likely to apply for and receive credit as their counterparts managed by men, they receive lower amounts of credit. This disparity is not due to differences in risk profiles, profitability, or productivity. Women-led firms show a 15% higher average return on capital, suggesting that there is gender-driven capital misallocation, especially in countries with stringent social norms.
Access to finance is essential for firm growth, yet women-led businesses often face significant barriers. Both demand-side barriers, such as social and cultural norms affecting female entrepreneurs’ ability to apply for credit, and supply-side barriers, including loan officers’ implicit biases against women, contribute to these gender gaps (Asiedu et al. 2013, Alesina et al. 2013). Additionally, contextual factors such as regulatory and legal restrictions, social perceptions, and gender-based violence further constrain the growth of women-led firms (Ubfal 2023). This column summarises the findings of our recent paper (Grover and Viollaz 2025) that systematically documents the financial constraints faced by women-managed firms and their broader implications for capital misallocation.
Using micro-data from the World Bank Enterprise Surveys (2008–2023) covering 61 countries, our analysis examines formal firms with at least five employees, focusing on both extensive and intensive margins of credit access. Countries are classified as ‘more traditional’ or ‘less traditional’ based on social perceptions about women’s roles from the World Values Survey. Specifically, countries where more adults agree that “[w]hen jobs are scarce, men should have more right to a job than women” are deemed more traditional.
Gender differences in opportunities and constraints breed inequalities, which have significant implications for allocative efficiency (Pan et al. 2025), capital misallocation (Morazzoni and Sy 2022, Ranasinghe 2024), and aggregate productivity (Goldberg and Chiplunker 2021). Following this literature, we construct two empirical indicators of capital misallocation – average return to capital and a measure based on the marginal revenue product of capital – to help assess whether women-led firms operate with sub-optimal levels of capital compared to their male counterparts.
There are no gender gaps in financial access on the extensive margin
Women-managed formal firms do not face credit constraints on the extensive margin, as they are equally likely to apply for credit and are 5 percentage points less likely to have their applications rejected compared to firms mamanged by men (Panel A of Figure 1). This lack of a gender gap in the likelihood of applying for credit holds across different social and cultural norms. However, in traditional countries, women-led firms are 12 percentage points less likely to face credit application rejection.
Prima facie, this is a surprising finding. However, this may be the result of a stronger selection process, where only the most capable women in traditional countries become managers of formal firms. This aligns with the findings of Morazzoni and Sy (2022) for the US, who show that only the most capable women enter entrepreneurship.
Content retrieved from: https://cepr.org/voxeu/columns/gender-bias-access-finance-and-implications-capital-misallocation.
