Women’s entrepreneurship is growing and making waves in the business landscape worldwide. The number of women operating their businesses is increasing globally, whether it is in the United States, where women opened more companies in 2023, or in Africa, where the highest proportion of women entrepreneurs reside, or in Asia, where the number of women entrepreneurs account for 9.8% of the total ASEAN (Association of Southeast Asian Nations) population. Access to funding is a major constraint for female-led businesses to operate and grow their companies; therefore, increasing women-owned businesses’ access to funding is critical to their success and growth.
This year’s International Women’s Day theme is ‘Invest in Women: Accelerate Progress’. To ‘Accelerate Progress’ and increase financing for women entrepreneurs, stakeholders must tackle those roadblocks that can seem trivial but are not. When investors and financial institutions invest in women-owned businesses, they can accelerate gender equality. A global credit gap for women-owned businesses is estimated at $15 trillion. Women entrepreneurs face systemic barriers that their male counterparts don’t face. In many countries, there are legal barriers to women’s entrepreneurship, including legal barriers that forbid women from signing contracts and opening bank accounts, cultural and social biases, and limited time and skill.
Gender equality is a necessary foundation for a prosperous and sustainable world, but the world is not on track to achieving gender equality by 2030. Increasing women entrepreneurs’ access to funding by addressing some of the obstacles that prevent them from accessing needed financing can help promote gender equality in the area of female-led businesses.
The lack of funding is a common constraint provided when speaking to women-owned businesses about their growth Still, when you ask them about current financing available and why they’re not applying for funding programs or contacting banks to apply for loans, the common answers are – not aware, don’t think they’d get approved, don’t know the right people, or burdensome application processes that require a lot of time. So, even though funding programs are out there, these limiting factors still affect women applying for and getting funding.
Addressing roadblocks that prevent women entrepreneurs from accessing available finance is even more critical now than ever, not only for current women entrepreneurs but for the ones to come. One study notes that more women are planning or starting businesses.
So, what are the subtle obstacles that inhibit female-led businesses from accessing funds to grow their businesses?
Not aware of funding programs
Anne K. is a young female entrepreneur living in Kampala, Uganda, who dreams of starting a hair care line of shampoo and conditioner. She currently collects used plastic bottles and sells them to an organization. She needs funding to start her business on a small scale, but she’s unaware of what is available, or if there’s something available for someone like her. she’s also unbanked. For now, her dream of starting a business remains just a dream.
Someone might say, well, it is the responsibility of women entrepreneurs to become aware of programs available to them. But it is important to understand that women also manage their homes; sometimes, there is only a little time to do everything. Women perform more unpaid care and domestic work, which constrains their time. Research by CARE International revealed that expectations about women being the primary caregivers are as strong as ever.
When a woman takes care of the home and runs a business, the home front can tip the scale in its favor, stealing her attention from the company. There’s not much time to spend searching for available funding options. As the World Economic Forum suggests, women need solutions to meet them where they are by creating women-centered designs that solve real problems.
Additionally, the World Bank notes that women in developing countries are excluded from formal banking due to needing more official forms of identification, mobile device access, and informal and formal norms and structures that limit their financial capability and capacity.
Not included in networks
Omotayo A., a female agrireneur in Lagos, Nigeria, learned about a financing program for female-led businesses. She participated in the training associated with the program but needed to qualify for the funding. She stated that another entrepreneur in the same program who knew someone within the organization was able to get approved for the funds, unlike her, who did not know anyone. Omotayo started working on getting the connection to the network needed to access the funds required to scale her agribusiness. She was unable to obtain the funding.
The saying ‘it is not what you know, but WHO you know’ plays a role in women-owned businesses accessing the funds they need. Besides not being aware of the funding programs, not knowing the ‘right people’ can also inhibit access to funding. The lack of access to networks affects women entrepreneurs and is increasingly being recognized as an essential way to empower women entrepreneurs and address inequalities.
Access to networks can lead to collaborations and valuable partnerships that can help women entrepreneurs connect with the right people in the right industry and learn about the programs available to them.
Not big enough to invest in
Patricia W., an interior designer, runs her home-based business in Atlanta, GA. She works alone and has found it challenging to access loans through her bank to help her grow her business. Her credit and asset requirement has limited the amount of loan she can receive. The bank representative has advised that her business is small.
According to Global Entrepreneurship Monitor, women are more likely than men to start a business with zero employees. The report notes that women are “very less likely” to begin a company with more than 20 employees and are more inclined to start a business with zero to 19 employees. In India, another study by Bain & Co showed that women-owned businesses are majorly managed by sole entrepreneurs.
Additionally, 30% of women worldwide are self-employed in the informal sector. The World Bank notes that 63% of women-owned businesses in Africa tend to be home-based and small-scale entrepreneurship. In the United Kingdom, a venture-forward study found women are running almost 40% of microbusinesses, an increase from 32% the year before.
A business’s size directly influences its available finance options. The access that larger companies have to finance is different from smaller firms. Research notes that women are more likely than men to be solopreneurs and run smaller businesses, which can affect their ability to access funding. Large businesses have more access to traditional bank loans than smaller firms because of their size and other reasons like assets, more extended history, and a more established reputation.
Conclusion
Accelerating gender equality by increasing women entrepreneurs’ access to funding is critical to reducing poverty and fostering economic growth. According to the World Economic Forum, prioritizing women’s financial needs could help add $10 trillion to the world economy by 2030. There is a financial incentive to address and remove roadblocks for women to access funds and grow their enterprises. To help close the funding gap, stakeholders must become aware of the subtle obstacles that inhibit available financing from reaching women entrepreneurs.
By tackling these obstacles, more women will become aware of financing options available, be accepted into networks that give them access, and be comfortable with the size of their businesses while being bold and confident to approach investors or financial institutions.
There is more to financing women than just access to funds. Investors, financial institutions, mentors, and stakeholders must meet women where they are. Women-led businesses are asking for a chance. At Kilsah Consulting, for example, the annual grant funds mostly women-owned micro businesses. The application process for these grants takes into account women entrepreneurs’ limited time. Collateral and application forms are structured to remove unnecessary questions. This was to ensure a less burdensome application requirement and process for women, which increased the number of women applicants.
When women are supported and empowered to overcome these subtle obstacles, they can build and grow their enterprises, create jobs, and reduce poverty. Take a real chance on female-led businesses. Maybe she’s too small, maybe she is not part of a particular network or circle, and she doesn’t come recommended by someone. Let’s rally behind women entrepreneurs and accelerate progress.
Count her IN – in your network, investment decisions, and design processes when creating awareness for financing programs. Investing in women pays.
About the Author:
Elfreda K. Sheriff is the Managing Director of KilSah Consulting, a development firm that provides research, policy advisory, training, and mentoring services for Micro, Small, and Medium-sized Enterprises. She promotes women’s empowerment through entrepreneurship.
