Women-owned firms and discouragement to apply for credit: evidence before and during the COVID-19 pandemic

This study investigates the behaviour of female-owned firms as discouraged borrowers, i.e., not applying for credit. We specifically seek to understand the underlying reasons for not applying for credit both before and during the COVID-19 pandemic and whether this behaviour is due to demand-side or supply-side reasons. Our findings show that firms owned by women generally act as discouraged borrowers. However, we identify a change in the motivations behind the decision not to apply for credit; before the COVID-19 pandemic, the discouragement is due to expected denial (demand-side reasons), whereas during the COVID-19 pandemic, the choice not to apply is due to unfavourable credit conditions, including high cost of credit and the collateral required (supply-side reasons). Our research contributes to the lively debate exploring how policymakers and regulators can improve access to credit for women entrepreneurs, especially in times of crisis.