Adam Smith Business School

Dr Samuel Mwaura, University of Strathclyde 

'When all else is not equal: gender, ethnicity and the journey to loan financing'
Thursday 21 April 2022, 1pm - 2.30pm 
Zoom online seminar 

Register at business-school-research@glasgow.ac.uk

Abstract 

Many studies evaluating disadvantage in enterprise financing by gender and ethnicity find that, once you hold other various factors constant, gender and ethnicity are not themselves significantly associated with disadvantage. Descriptive statistics and qualitative research however suggest that disadvantages persists. Some quantitative studies have also found evidence that structural factors could themselves be gendered, leading to subtle second-order gender effects. Evaluated as interactions, these second-order are however often tested one at a time. Most studies will also usually look at specific aspects of bank financing, for example discouragement from applying, successful application outcomes, or cost of borrowing. This study employs the SME Finance Monitor data to develop a more comprehensive picture of the journey to loan financing for female-led and minority-led SMEs. To do this, we specify a simple outcome tree with the three major sequential milestones securing loan financing entails. First, you have to have an appetite for investment. Among those that do, you then need to apply for loan financing. Lastly, among applicants, some will be successful and others not. Selection effects are thus inherent in this journey as not all SMEs make it over the first two hurdles. We then estimate the effect of a number of variables, capturing aspects of strategy, financial management, and firm characteristics, on the three sequential outcomes for the full sample and subsamples split by gender and ethnicity separately. Comparing the estimate coefficients for each variable between the sub-subsamples along the outcome tree, consistent with recent research, we find that all else equal, there are scant first-order gender and ethnicity effects in the outcome tree to securing loan financing. However, there are indeed a number of subtle second-order effects that could explain the persistent gender and ethnicity-based disadvantage that lurks in our economy. To alleviate such disadvantage, our study suggests that policy needs to understand the financing journey of SMEs more granularly at the sub-group level.

Biography

Dr Samuel Mwaura is Lecturer of Entrepreneurship at the Hunter Centre for Entrepreneurship, University of Strathclyde. His recent research has focused on rates of entrepreneurial activity in Scotland and the UK, ethnic minority, migrants’ and female entrepreneurship, and the national entrepreneurial ecosystem in Scotland as well as the regional South of Scotland ecosystem. Samuel is passionate about knowledge exchange and research impact. He is a member of the Scottish Government’s Minority Ethnic and Migrant Enterprise Working Group, has been a judging panellist with the Scottish Edge, has facilitated minority enterprise policy hackathons, and has experience disseminating research through community engagement events, as well as mainstream and social media.

 

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Further information: business-school-research@glasgow.ac.uk

First published: 25 March 2022