The process of female borrower discouragement

• Published in: Emerging markets review 2022-03, Vol.50, p.100837, Article 100837
• Main Authors: Naegels, Vanessa, Mori, Neema, D'Espallier, Bert
• Format: Article
• Language: English
• Subjects: Borrower discouragement; Entrepreneurial finance; Female entrepreneurship; Grounded theory
• ISSN: 1566-0141; 1873-6173
• DOI: 10.1016/j.ememar.2021.100837

Recent entrepreneurial finance literature identifies ‘borrower discouragement’ as an important phenomenon explaining why female entrepreneurs hold less capital to grow their venture. But how do you become a discouraged borrower? We apply grounded theory to interviews with Tanzanian female entrepreneurs and model the process via which these entrepreneurs become discouraged. Our model suggests that entrepreneurs hold negative perceptions regarding loan application, allocation and payback procedures shaped by both internal and external information sources. We demonstrate that negative perceptions cause an unfavorable attitude towards formal loans which together with entrepreneurs' perceptions of societal norms lead to a low intention to apply. •Borrower discouragement is a key demand-side funding constraint in emerging markets.•We model the process via which female entrepreneurs in Tanzania become discouraged.•We find negative perceptions towards loan application, allocation and payback.•These perceptions are formed through personal experiences and social interactions.•In combination with societal norms these perceptions lead to low intention to apply.