PEP-PAGE project

Is there discrimination against female entrepreneurs in formal credit markets in Nigeria?

Contrary to the results of other recent studies, this PEP research team did not find evidence of significant discrimination against women in formal credit markets in Nigeria. However, results from their analysis show that micro/small enterprises are significantly more “credit-constrained” relative to medium enterprises. And the fact that women entrepreneurs are mostly involved in small and micro ventures suggests that access to formal credit is, nonetheless, a big constraint to the growth of women enterprises at that level in Nigeria. Find out more below, or through the following publications: PEP working paper 2015-01 and policy brief 116.


Context, issues and objectives

This project seeks to examine the situation of women entrepreneurs (at the “small and medium enterprise” level) in Nigeria, to assess whether the latter are marginalised in the formal credit markets, compared to their male counterparts, as well as the impact of credit access on the general performance of SMEs.

Access to finance is often cited as one of the major factors impeding the growth of women-owned businesses in developing countries. However, one critical question that remains in the existing literature is whether this “access problem” is due to actual discrimination against women entrepreneurs in the formal credit market, especially in the developing world, and if so, the extent to which women are discriminated.

 

An overview of the existing literature on access to credit suggests that, as of today, there is no clear conclusion on (nor evidence of) gender discrimination in the formal credit markets. In fact, several strands of literature have emerged in recent years, each taking a particular position on the subject.

In order to help inform related policy and program interventions, a team of local researchers in Nigeria has sought PEP support to examine the situation of women entrepreneurs (at the “small and medium enterprise” level) in their country – i.e. to assess whether the latter are marginalised in the formal credit markets, compared to their male counterparts. Their study also investigates the impact of credit access on the performance of enterprises.

Research method and key findings

The researchers used data from the 2010 World Bank Investment Climate Survey, conducted among Nigerian enterprises, to built a direct measure of “credit constraint” – i.e. to identify those firms that are considered as credit-constrained, versus non-constrained. After excluding those that do not qualify as SMEs, as well as those with existing lines of credit (from previous periods), the researchers kept a sample of 1590 firms with demand for external finance - 1330 of which are owned by men and 260 by women.

A series of econometric models and methods of statistical analysis were then applied on the data from this sample to complete the analysis – i.e. to determine whether female-owned firms are relatively more constrained than men’s in terms of credit access, as well as to assess the impact of such access on the firms’ performance.

Contrary to the results of recent cross-country studies (that included Nigeria), the researchers did not find evidence of significant discrimination against women in formal credit markets in Nigeria.

However, their results show that micro/small enterprises are significantly more “credit-constrained” relative to medium enterprises. Therefore, the fact that women entrepreneurs are mostly involved in small and micro ventures suggests that access to formal credit is, nonetheless, a big constraint to the growth of women enterprises at that level in Nigeria.

On the other hand, their findings also reveal that access to formal credit has significant impact on firm performance indicators.

Find out more about the research methods and findings, as well as ensued policy implications, through the PEP publications posted below - in particular, the working paper 2015-01 and policy brief 116
 

Project links and documents

Research team

Find out more about this project - its analytical approach and outcomes - through the following links/documents:

From the Department of Economics,
University of Nigeria
Nsukka, Enugu State (Nigeria)

  • Mr. Emmanuel O. Nwosu
    Lecturer
  • Mr. Anthony Orji
    Lecturer
  • Ms. Chioma Nwangwu
    Researcher
  • Ms. Vivian Nnetu
    Lecturer
PEP Project PMMA-12384 Working paper 2015-01 (PDF)
Project proposal (Word) Policy brief 116 (PDF)
Final report (PDF) Slide presentation (PDF)

Policy engagement, consultation and dissemination

The project was conducted in consultation with officials and high-level representatives from the Central Bank of Nigeria (and related Center for Entrepreneurship Development, sponsored by the CBN), the Federal Ministry of Finance, the Association of Nigerian Women Business Network, the International Federation of Business and Professional Women, the World Bank country office, as well as several microfinance institutions and banks.

Based on the researchers’ findings and recommendations, officials from the Central Bank of Nigeria have acknowledged the difficulty for micro and small enterprises to access formal credit, and the need to address this issue by giving priority to those entrepreneurs, especially women, through the program of the national “SME Intervention Fund”. Moreover, it was decided that new training programs would be implemented by the Center for Entrepreneurship Development, to provide education on formal credit access for micro/small entrepreneurs. Moreover, as a result of these consultations, the project leader was hired by Policy Analyst in the Office of the Federal Ministry of Finance.

National policy conference and media coverage

On March 11, 2015, the team organized a national policy conference in Abuja, in collaboration with (and at the offices of) the Center for the Study of the Economies of Africa (CSEA), to communicate and discuss their conclusions and recommendations directly to/with key policy makers, advisors and stakeholders. In addition to providing important feedback to the researchers in regards to the potential uses of their findings for policymaking, the participants committed to both take-up and further disseminate these findings amidst relevant government agencies.

The event also benefited from national media coverage, including an important article by the newspaper "The Guardian" on March 15 (find the web article here) which has contributed to communicating the findings to the general public. Find out more about this event and related outcomes.


PEP-PAGE projects

The project described above is one of the several projects selected for support under the PEP research and capacity building initiative for Policy Analysis on Growth and Employment (PAGE) in developing countries. The PAGE program is co-funded by UK's Department for International Development (DFID) and Canada's International Development Research Center (IDRC).

This particular project was selected in June 2013, following the first of three competitive calls for proposals of the PAGE initiative. So far, a total of 42 projects have been selected for support under the two first PAGE funding rounds. Find out more

     

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