Gender bias in access to trade credit: Firm-level evidence from emerging markets

How do small and medium-sized enterprises (SMEs) led by women fare with respect to obtaining trade credit? While both trade credit and bank credit have long been viewed as potentially important financing instruments for SMEs, there is considerable ambiguity in the existing literature as to whether they complement or substitute each other from the perspective of credit-seeking SMEs. This is even more important for Women-Led Businesses (WLBs) in emerging markets and developing economies (EMDEs) who tend to face higher severity of credit constraints relative to their male counterparts. Given this context, using firm-level data on 95 EMDEs over 2009–2020, we contribute to the literature on gender bias and credit access by examining three specific questions: First, is there a gender bias in obtaining inter-firm trade credit? Second, if there is one, can those WLBs with access to traditional bank finance use it as a signal to obtain trade credit? Third, how does this relationship hold for SMEs that are women-led? After tackling potential endogeneity bias, our empirical findings show that WLBs are less likely to obtain inter-firm trade credit relative to their male counterparts, although we observe that this bias tends to disappear when WLBs have received an institutional source of financing. We establish robustly that bank credit can act as a signaling device enabling the accessibility of inter-firm trade credit, suggesting a complementary relationship between trade credit and bank credit for WLBs.