Do Banks Discriminate against Women Business Owners?
Increasingly, more women are becoming owners of small businesses. However, questions concerning how they are treated by banks and other financial institutions have been raised by women’s groups. Banks are particularly important to small businesses, since studies show that banks financing represents about one-quarter of total debt, and that for medium-size businesses the proportion rises to approximately one-half. If women’s requests for loans are rejected more frequently than are men’s requests, or if women must pay higher interest charges than men do, women have cause for complaint. Banks might than be subject to criminal as civil suits. To examine this issue, a research project was launched. The researchers surveyed a total of 1165 business owners of whom 115 were women. The survey asked a series of questions to men and women business owners who applied for loans during the previous month. The questions asked in the survey included the following:
1.What is the gender of the owner? 1.Female 2.male
2.Was the loan approved? 1.no 2. Yes
3.If it was approved, was interest rate did you get? How much above the prime rate was your rate?
Of the 115 women who asked for loans, 14 were turned down. A total of 98 men who asked for loan were rejected. The rates above prime for all loans that were granted were recorded.
What do these data tell you about possible discrimination against women?
(Hint: Compare the proportion of approved loans for men and women and compare the interest rates for approved loans between men and women. Use the appropriate tests and/or confidence intervals)
Researchers performed further analyses. The following pieces of information were gathered for each company:
1.Form of business
2.Annual gross sales
3.Age of the firm
These data, together with the data from part 1 were stored in the following way.
Column 1: Rates above prime paid by women
Column 2: Type of women’s business (1=proprietorship, 2=partnership, 3=corporation)
Column 3: Annual gross sales of women’s businesses (in thousands of dollars)
Column 4: Age of women’s businesses
Column 5: Rates above prime paid by men
Column 6: Type of men’s business (1=proprietorship, 2=partnership, 3=corporation)
Column 7: Annual gross sales of men’s businesses (in thousands of dollars)
Column 8: Age of men’s businesses
What do these data tell you about the alleged discrimination against women by banks?
(Hint: Compare the form of business, the annual gross sales and the ages of businesses owned by men and women. Use the appropriate tests and/or confidence intervals)