The Impact of Institutional Factors on Female and Male Owned Firm Financing

The study compares the impact of the commercial environment on external financing of female- owned micro, small and medium enterprises (MSMEs) compared to those that are male owned in seven South Asian countries. The region exhibits weak institutional and regulatory regimes which result in expropriation of profits from MSMEs. It is likely that such commercial environments add to the risk of lending to MSMEs and this may further manifest a gender bias toward males. This study uses a unique dataset of over 5000 firms from World Bank Enterprise Surveys and combines this with additional information drawn from World Bank macro-economic data. Interval and logit regressions are used. Contrary other studies, this research indicates that once females have access to formal financing they use a higher proportion of formal financing in their firm capital structure than their male-counterparts. A gap in accessing external finance for female-owned MSMEs presents both a waste of human resource and a lost potential to lift standards of living, presenting an opportunity for reform.