November 10, 2011

The rawest deal women entrepreneurs get in access to bank loans has nothing to do with their gender

Sir, Noreena Hertz writes that “Women are getting a raw deal in business and in finance” November 10, and bases that opinion on a study about the differences between women and men in terms of access to bank loans. She holds that if there was to be less discrimination more women entrepreneurs would be able to help out the economy. and she also makes reference to the possible legal consequences for the lenders.

She might be right, but, whatever discrimination women entrepreneurs are subject to because of their gender, pales in comparison to the odious arbitrary regulatory discrimination they are subject to because they are officially perceived as “risky”, and therefore the banks are forced to hold many times more capital when lending to them than what they are required to have when putting their money in triple-A rated instruments or sovereigns.

Since the “risky” are already discriminated against by banks in terms of interest rates, amounts, maturities and much other, the above amounts to layer a discrimination on top of a discrimination… something akin to asking the banks to hold more capital when lending to women.

If Noreena Hertz really wants to help she should first aim at the regulatory discrimination and once that idiocy dis taken care of, then she might perhaps request banks to be required to have somewhat less capital when lending to women, to compensate for the remaining discrimination.