How to improve business financing of women led startups

Efforts are made to strengthen female entrepreneurship, as the field of technology continues to be male-dominated. Female founded and female led startups are becoming more commonplace but still only account for a fraction of startups worldwide. This is true for all countries in the world but there are regional differences. For instance Central and Eastern Europe have more female founders than any other region in Europe, data from Statista shows. A report published in LSE Business Review says women-owned businesses face what academics call “borrowing discouragement”, the reluctance to seek business financing because they believe their applications will be rejected. 

“This happens despite no evidence of gender-based discrimination from financial institutions, two Lecturers at the University of Huddersfield, Erhan Kilincarslan and Jiafan Li, write that this is not women’s fault. In a blog post they discuss ways in which society can prepare future generations of women.

“Research indicates that women entrepreneurs are more likely to interrupt the application process out of fear of rejection, despite no evidence of gender-based discrimination from financial institutions. However, it is crucial to recognise that women should not be blamed for discouragement. Instead, society must prepare future generations.”

World Economic Forum’s Global Gender Gap Report 2023, says it will take 169 years to close the global economic participation and opportunity gender gap. 

“But there exist considerable differences among geographical regions. For example, full gender parity is estimated to be attained in 52 years (by 2076) in Latin America and the Caribbean, while it will take 189 years (by 2212) for East Asia and the Pacific region at the current rate of progress”, they write.

“The Women Entrepreneurs Finance Initiative reveals that women entrepreneurs could potentially contribute $5-6 trillion to the global economy if sufficiently funded.”

“It takes remarkable courage and resilience for women to stand out in a male-dominated world. Overcoming borrowing discouragement is essential, and like Taylor Swift sings, “all I do is try, try, try.” Let’s work together to empower the next generation of women entrepreneurs.”

Among their conclusions:

• First is educational attainment. Lack of numeracy and financial literacy education undermines women entrepreneurs’ confidence in applying for business finance. Girls aged 9-14 are slightly less confident in STEM subjects than boys, despite comparable performance.
• To combat stereotypes and build up women’s confidence, parents, teachers and decision-makers should encourage girls to engage with maths and science from an early age.
• Another significant factor is the insufficient personal financial education provided in primary and secondary schools. Alarmingly, only one per cent of UK primary school teachers believe that their students possess adequate financial literacy. Some women develop risk-averse attitudes and lack confidence in financial investment and entrepreneurship. To empower the next generation, society must prioritise financial education starting from early schooling to improve their confidence and competence.
• Society is responsible for challenging the stereotype that the modern business world is a male-dominated environment. Researchers argue that women should not be blamed for borrowing discouragement because it stems from rational beliefs based on their experiences. Policymakers, governments and financial institutions should guide the public to understand the reasons behind stereotypes about the gender gap in entrepreneurship.
• Societal and cultural promotion of women’s confidence contributes to a fear-free environment for women entrepreneurs. Gen Z has increasingly focused more on gender equality in education and pay than Gen X and Y. Governments and organisations should promote inspirational female role models with successful careers.