Banks penalise women in business

WOMEN entrepreneurs are charged much more than men to finance their businesses. Big banks typically make them pay one percentage point more in interest on business loans.

The practice was revealed in a study into the hurdles that could prevent small businesses from flourishing. The research was commissioned by the Bank of England and a consortium of 19 public and private sector bodies.

'Majority female-owned businesses pay significantly higher margins on term loans than male-owned businesses - 2.9% against 1.9 points over base,' said the report from researchers at Warwick Business School.

That means a woman running her own business will typically be paying 7.65% in interest on a large loan, compared to 6.65% for a man. The higher cost of borrowing will inevitably put a strain on the business. In the cut-throat world of private enterprise, that could mean the difference between failure and success.

The Forum of Private Business claimed higher charges for women were simply one example in a range of questionable bank practices. They pointed out that the four big banks - Royal Bank of Scotland, Lloyds TSB, HSBC and Barclays - effectively have a stranglehold on Britain's small businesses because they control 80% of accounts.

Head of research at the FPB Andy Mowlah said: 'The research shows that the majority of female-led small firms pay one percentage point more for their money than their male peers.

'This equates to an extra £1,000 on £100,000 of borrowings which is totally unacceptable. It is precisely this kind of practice which needs to be cracked down on by the Bank of England.'

The major banks have a policy of charging higher interest to customers and businesses they consider a greater risk. Ruth Lea, director of the Centre for Policy Studies, said: 'There may be good business reasons. The simple facts are that women generally have less experience in running a business, they might tend to set up firms which are inherently more risky. However, if there is genuine discrimination going on here, the banks should be ashamed of themselves.'

The study questioned 2,500 firms about their financing. The executive director of the British Bankers Association, Joanna Elson, denied any gender bias.

She said: 'We have been rather puzzled by these findings. The truth is we cannot really understand or explain what has happened. One theory is that there are fewer female-owned businesses and they tend to be newer and therefore might be considered riskier.'