Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns

This paper analyzes data from a randomized experiment on mean returns to capital in Sri Lankan microenterprises. Findings show higher returns among men than among women. The study explores reasons for lower returns among female owners, and finds that:

• Gender gap cannot be explained by differences in ability, risk aversion or entrepreneurial attitudes;
• Women invest grants differently from men;
• Men are more likely to spend the grant on working capital and women on equipment;
• Gender gap is largest when male dominated sectors are compared with female dominated sectors;
• Female returns are lower than male returns even when they work in the same industries.

The paper examines heterogeneity of returns to determine whether any group of businesses owned by women benefit from easing capital constraints. The results suggest there is a large group of high-return male owners and a smaller group of poor, high-ability female owners who might benefit from greater access to capital.