Do Women-owned Start-ups Have a Lower Probability of Obtaining Loans? An empirical analysis using panel data from Japan

Using data of start-up businesses in Japan, we compare the probability of women obtaining loans to that of men. We control for not only individual attributes but also firm characteristics containing yieldability, cash flow, and the ability of debt redemption. Women-owned start-ups have a 11-14 percentage point lower probability of obtaining loans when they need credit. On the other hand, once they apply for credit, they have just a 2-3 percentage point lower probability of obtaining it than do men-owned start-ups. This means that women are likely to give up on obtaining loans before applying. Are banks reluctant to lend money to women? We take this one step further and find that women-owned businesses with a similar propensity score in obtaining loans show a comparable performance to men-owned businesses. This indicates that banks make the proper decision in whether to provide credit based on each business' characteristics and expected performance.