Gender Discrimination and Discouraged Borrowers in Bank Loan Applications : Evidence from Southeast Asian Countries Nurshamimi binti Abdul Samat

Thesis submitted for the degree of Master of Science by Research Universiti Teknologi Brunei

Abstract
Access to finance for small and medium-sized enterprises (SMEs) is a recurring theme in finance literature as well as an important policy concern given that SMEs are considered as the backbone of an economy, job creation, innovation, and economic growth. Bank discouragement behaviour where an entrepreneur or a firm manager is discouraged from applying for a bank credit out of fear of loan application rejection constitutes an important segment of the small business financing and has long-term consequences for SMEs survival, profitability, and growth. Empirical studies on the bank-discouragement behaviour has mainly been conducted in developed markets with little empirical evidence on the dynamics of loan application behaviour in the emerging markets of South East Asian Economies. This study seeks to fill this research gap by examining two interrelated research objectives by using firm-level survey data from five Southeast Asian countries. First, the study examines whether the gender of the top managers of SMEs influences the firm’s decision not to apply for a bank loan out of fear of rejection, despite requiring external financing for business operations and growth. Second, this study examines whether SMEs run by female top managers face discrimination in bank loan approvals. The empirical results provide evidence in support of the notion that the gender of the top manager is an important factor influencing borrower discouragement, as firms led by female top managers are more likely to be discouraged from applying for bank loans than those run by male top managers. Second, this study also finds evidence of gendered discrimination in loan approvals in Southeast Asian countries, except for Brunei Darussalam. This also implies that cultural differences could be one of the reasons why some countries do not experience gender discrimination in bank loan applications. In other words, female-led businesses are more likely to be denied bank credit than male-led businesses. Finally, firm size moderates the relationship between borrower discouragement and gendered borrower discouragement, which is more prevalent among smaller firms than among larger firms. By reducing gender discrimination, there would be increased equality and social justice in an entrepreneur's access to bank credit, fewer economic inefficiencies and less-than optimum level of investments and enhanced long-term economic sustainability for firms and financial institutions.

Thesis (Master) - Universiti Teknologi Brunei, 2023

Includes bibliographical references from page 58-62