Women Entrepreneurs Still Struggle with Finding Funds for Startups

By: GWL Team | Sunday, 12 May 2024

New study “A Meta-Analysis of the Impact of Entrepreneurs’ Gender on their Access to Bank Finance” reveals two key factors behind the struggle faced by women entrepreneurs in getting entrepreneurial financing while facing gender disparity in the business sphere worldwide.

Over the decades, women-owned businesses have been gradually growing and we are witnessing a rise in the number of women in the corporate sector as well. Women entrepreneurs are brilliantly excelling in almost every industry with their understanding and extraordinary talent.

There are startups that are owned and run by women entrepreneurs all across the world which are now big players in the industry with their market presence and proactive participation towards solving problems for the people.

Despite proving their potential and calibre, women are still struggling in certain aspects in the business realm. Regardless of gender, a business leader has to undergo numerous challenges while running an organisation. However, a businesswoman has certain obstacles that men don’t come across. So, even though we say that the world is progressing, women still face gender disparity in about every sector.

Women in Entrepreneurship facing Gender Bias

In a new study published by Harvard Business Review, it has been found that women entrepreneurs are still struggling with gender disparities in the business sphere while having several numerous challenges. The report reveals that only 1/3 business are owned by women while women founded startups were just 20 per cent in the year 2019.

Here the question arises, ‘why is it happening?Though the answer is funding. According to the study, women owned startups struggle to get funding for their businesses which exemplifies that there’s discrimination in financial terms. In the year 2019, all-female business has only got 3 per cent of total investment which was earlier in the year 2018 counted to 4 per cent. The percentage further dropped to 2 per cent in the year 2020 and lingered with the same rating in 2021. The percentage of all-female business deals remained static at 6 per cent.

As per the report, there’s a rough financing gap of $1.7 trillion for women-owned small- and medium-sized enterprises worldwide. This huge gap relies somewhere behind the reason for the slow growth and expansion along with the overall profitability of women-led businesses.

Gender Bias in Bank Finance

Malin Malmström alongside Barbara Burkhard, Charlotta Sirén, Dean Shepherd, and Joakim Wincent has come up with a 3 decades long research entitled as “A Meta-Analysis of the Impact of Entrepreneurs’ Gender on their Access to Bank Finance” that discloses underlying reason behind the perceived misalignment between women entrepreneurs and the entrepreneurial role.

The study claims that women face challenges even in the high-income countries. As mentioned by Global Entrepreneurship Monitor’s 2021/22 Women’s Entrepreneurship Report, women entrepreneurs in some of the countries like Germany and the U.S. which are considered as the high-income countries, face less gender discrimination but it still persists when it comes to financing.

Factors inference for Women in Entrepreneurial Financing

The study comes with 2 factors which has implications for women in entrepreneurial financing i.e., (a) The political ideology dominating a country and how it influences gender-biased financing conditions. (b) The degree of women’s empowerment, such as women’s participation in high-profile leadership positions, and its effect on gender discrimination in bank financing conditions.

When summarizing the two factors, we come to a point that women in countries with conservative political ideology in their governance, counter greater gender bias in financing for entrepreneurship. In addition to the gender bias, women entrepreneurs have to pay higher business loan interest rates as compared to men entrepreneurs. This not only slows down the growth rate of women in business but also weakens their optimism towards running a business in such scenarios.

The second factors indicate towards a society that consider women in leadership position as threats. This perception is somewhere becoming a vital concern in terms of women not getting the access for funding.

Advocating for Volunteerism 

If we continue to live in a society where women are getting enough opportunities, especially when it comes to financing for their businesses to grow, then we would never be able to cancel out the gender disparity for ages. By assisting women and supporting them, we, as a society can improvise the lifestyle of women, globally. With the elimination of gender bias, the economy of each country would also get better because of the increase in workforce and greater participation of women in the business sector.