Female role models to reduce self-censorship in access to credit
10/17/2023
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Despite remarkable progress over the last twenty years, female entrepreneurs are still less likely than men to apply for bank credit. Yet access to credit remains a key element in sustaining a company’s performance and growth, enabling it to seize investment opportunities and cope with economic ups and downs.
This reduced access to finance reduces the contribution of women entrepreneurs to the economy, particularly in terms of job creation, poverty reduction and economic growth. It also affects their personal income, constituting an obstacle to gender equality.
Unjustified self-censorship
Why are women entrepreneurs less inclined to apply for a bank loan? One reason is that they refrain from applying because they expect to be discriminated against and to have their loan applications refused or restricted.
Existing literature, however, underlines that this expectation is often mistaken: a large proportion of these women’s loan applications would have been granted if they had made the request. In the USA, for example, twice as many borrowers are “discouraged” (from applying) as rejected (women and men combined). For economies in Eastern Europe and Asia, this phenomenon is even more pronounced. For every rejected applicant, there are three discouraged borrowers.
Furthermore, loan applications from female-owned businesses are generally not rejected more than those from male-owned businesses. So, women’s “self-censorship” regarding their access to credit does not necessarily have any real economic basis.
One of the key factors in this trend stems from women’s self-image. They tend to have less self confidence in their entrepreneurial skills, particularly compared to men, and this leads them to believe that they are less likely to obtain a loan. In particular, the lack of female role models can give women the impression that entrepreneurial success is an unattainable domain for them, thus restricting their aspirations.
They may also feel excluded or out of place in a male-dominated environment. In short, the lack of successful female role models in the field of leadership means that women are unable to project themselves and identify with a similar role in which they would exercise strong decision-making power. This is known as the “role-model effect”.
Inspiring female political leaders
In a recent study, we explored the extent to which this effect can change women’s self-perceptions and encourage their access to credit. In particular, we demonstrated that female entrepreneurs in countries headed by female political leaders were more likely to apply for credit.
These female political leaders have a high profile and the power to change the perception of women’s competence in society as a whole, particularly by succeeding in a highly competitive and often male-dominated environment. This is reflected in the behavior of female entrepreneurs. They ask for more credit and are less self-restrained financially. We show that it is indeed “emotional” discouragement that is reduced, i.e. the sources of discouragement linked to a lack of self-confidence and a belief in rejection unrelated to underlying economic causes.
The effect is even more effective when the political leader has a high social status (measured by his or her level of education) and comes from the same country. Finally, we show that this result holds true mainly in countries with relatively low incomes, where social norms towards women are also the least advanced. The model can counterbalance the absence of these social norms and promote greater gender equity in access to credit.
This result suggests that exposure to female role models alters women’s self-perception, with significant economic consequences. The role-model effect thus becomes a powerful lever for achieving gender equity, by globally changing (self-) mental representations of the skills attributed to each sex.
Jérémie Bertrand, Professor of Finance, IÉSEG School of Management; Caroline Perrin, Postdoctoral Fellow, University of Strasbourg and Paul-Olivier Klein, Lecturer in Finance, iaelyon School of Management – Université Jean Moulin Lyon 3
This is a translated version of the article originally published on the Conversation France.
The original article in French can be viewed here.
