Blog cafe : Women’s interest

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: In Italy, bank overdraft facilities are an important source of credit for liquidity provisions for these firms. Within this category, microfirms held by women pay a higher interest rate (0.3% more) than firms managed by men.

How can we explain this differential interest rate between male- and female-owned firms on the same kind of loan? The first, natural answer is that female firms are more risky than their male counterparts. We looked at the data, and this was not the case

The differential could be simply explained by the fact that women establish credit relationships with some kind of banks. But again, the answer is no.

Is the differential due to an indirect effect of the bankruptcy law? Until 2006, the last year of our analysis, the law prevented a failed entrepreneur from opening a new business for a five-year period. This could have represented an incentive for a man with an outstanding bankruptcy procedure to list his new business in the name of a woman. For this reason, a “seemingly female” firm could pay a higher interest rate since its entrepreneurial profile would encompass the one of her relative. But, this phenomenon does not seem enough to explain the difference in the interest rates.

Is it discrimination or simple prejudice?Our result certainly does not rule out this hypothesis.