According to the World Bank, women-owned entities represent just over 30 per cent of formal, registered businesses worldwide, despite women making up almost half of the population.
This isn’t just an issue of gender, it’s about lost potential and a huge economic opportunity for us all.
Findings from the Rose Review suggest £250bn in total value could be added to the UK economy alone if women matched men in starting and scaling a business. So, what can be done?
Access to finance is key
There are a number of interlinked systemic factors that lead to lower levels of entrepreneurship among women.
These include societal expectations, for example women entrepreneurs on average spend twice as long on caregiving compared with men, as well as financial education and, importantly, access to finance.
Cash flow is essential to the success of any business, and access to investment can be critical to fuelling growth.
But data shows a clear funding gap. According to the British Business Bank’s Small Business Equity Tracker 2023, just 2p for every £1 of equity investment in the UK is directed towards women-led enterprises.
In the current context, access to finance is a challenge faced by all SMEs.
Our own SME Confidence Tracker shows that 61 per cent of SMEs have experienced existing lenders reducing credit availability in recent months.
This reflects a wider trend of lenders reassessing criteria in light of challenging economic conditions and growing insolvencies following the unwinding of Covid-19 support measures, alongside natural fiscal pressures on businesses today.
It’s evident, however, that many women SME owners feel there isn’t a level playing field when it comes to securing finance to start, establish or grow their business.
In our report, two-thirds of women SME leaders said high street sources were less likely to lend to them today, compared with 57 per cent of men.
And 48 per cent of women SME leaders believe it is more difficult for women to access external finance than it is for men.
What systemic biases are at play?
There are multiple complex factors, which result in the unconscious and systemic biases behind this gender funding gap.
By way of example, a study of interactions between venture capitalists and entrepreneurs published in the Harvard Business Review in 2017 found that venture capitalists posed different types of questions to male versus female entrepreneurs.
They tended to ask men “promotion” questions about the potential for gains, and they tended to ask women “prevention” questions about the potential for losses.
Confidence plays a vital role in business, and if women – who are typically more risk averse – sense bias or believe they will be declined for investment, they’re more likely to rely on more readily available sources, such as unsecured funding from friends and family.
