Gender Discrimination in Commercial Banks’ Credit Markets in Ghana : A Decomposition and Counterfactual Analysis

Access to formal credit in Ghana has been a major challenge to empowering women and promoting women enterprises even in this era of financial sector liberalization. Gender bias in both the formal and informal financial sectors have created huge credit gaps between men and women entrepreneurs. This study examines factors that influence credit rationing and discrimination against women in the credit markets of commercial banks in Ghana. Data for the study, comprising borrowers' information as provided in loan application forms, were gathered from the commercial banks' credit application database. Using the 2-stage least squares instrumental variable regression, we found that individual, firm, and loan characteristics were significant in determining credit rationing. The Blinder-Oaxaca decomposition and counterfactual analysis pointed to a credit gap between men and women entrepreneurs and discrimination against female entrepreneurs as the credit rationing gap was largely influenced by unexplained factors other than differences in endowments.