Bridging the Finance Gap for Women Entrepreneurs

14. Czechia: Policy insights on how culture influences access to finance

Dr. Marie Pospíšilová
Institute of Sociology of the Czech Academy of Science

Prof. Alena Křížková
Institute of Sociology of the Czech Academy of Sciences

Background

Traditional gender roles continue to persist throughout many aspects of society (EIGE, 2022[1]). For example, it is common for women to have greater responsibilities for housework and care for relatives than men (MPSV, 2022[2]). While many people support traditional gender roles for men and women (see (ISSP, 2012[3])), the employment rate of women in Czechia is relatively high (with a low share of part-time work) as most households rely on two incomes (CZSO, 2022[4]). Nonetheless, there is a high gender pay gap (Eurostat, 2021[5]), which is particularly due to the “motherhood penalty” since parental leave is three years (one of the longest periods of parental leave in Europe). The availability of institutional childcare is limited, especially for children under the age of three (Eurostat, 2022[6]), which hinders a return to work for young mothers since there are few opportunities for flexible and/or part-time work (CZSO, 2022[4]). Therefore, entrepreneurship is often viewed favourably by young mothers because business creation and self-employment potentially offer flexible types of work to help reconcile family and work obligations (CZSO, 2022[4]).

However, there are also strong gender inequalities in entrepreneurship as women only account for 31% of all self-employed people and business owners (550 000 men and 252 000 women in 2022) (CZSO, 2023[7]). In addition, women are more likely than men to start a smaller business (CRIF, 2022[8]) and largely operate in the service sector (CZSO, 2023[7]). Women also disproportionately account for “younger” companies. 37% of women-owned enterprises have been in business for five years or less compared to 32% of men-owned enterprises (CRIF, 2022[8]).

There is currently no specific women’s entrepreneurship policy, nor any specific financial measures that target women entrepreneurs. Overall, the mainstream financial instruments available to women entrepreneurs are often short-term measures that are typically targeted at the start-up phase. While there is some limited support for the “best” high-potential projects, few women entrepreneurs receive support and the criteria for obtaining support are not always clear. Even when women entrepreneurs successfully secure finance, they often face similar challenges obtaining finance during later stages of business development. The following is a brief overview of the types of financial instruments that are currently available to support the creation and operation of a business:

• Schemes supported by the Labour Office that typically support self-employment as a form of job creation, including support for job seekers.

• Schemes that are supported by EU Structural Funds (e.g. European Social Fund) that are often delivered by non-government organisations.

• Competitions or ad hoc programmes that are often offered or supported by private banks, providing financial support in the form of lump-sum payments that are only for the most successful applicants.

• Traditional bank loans that are often offered with high interest rates and are aimed at supporting businesses run predominantly by men (i.e. involving large sums of money or technological equipment).

• Finance from investors usually goes to support large projects that are expected to make a large profit quickly (i.e. typically IT and technology projects) and only very few projects are supported.

Policy issue: Social and cultural issues relating to access to finance

Consistent with the broad research literature, recent qualitative research based on expert interviews in Czechia1¹ suggests that many economically active women face barriers to labour market participation due to family and care responsibilities, including time spent outside of the labour market due to childcare. In addition, gender wage gaps persist across many sectors and occupations. Therefore, many women pursue entrepreneurship due to a lack of desirable work opportunities.

Gender inequalities in entrepreneurship finance are generally over-looked and under-estimated, including by the (financial) support programme providers themselves. Existing financial measures and schemes often do not take account of gender inequalities and do not adequately consider the different needs and circumstances of women entrepreneurs. Most measures and schemes are implicitly designed for working men without family responsibilities who can devote themselves to full-time work. They also do not actively take into account that women are more risk-averse nor is any targeted outreach to women entrepreneurs undertaken. As a result, few women use the available financial instruments and the institutions and organisations offering these instruments are often surprised that women entrepreneurs are not interested in them.

Traditional financial institutions such as banks are the main providers of finance to entrepreneurs. They tend to focus on loans serving enterprises that are established, growing, highly profitable, and often technology-oriented. Women-led businesses often do not fit the profile of targeted customers since they are less experienced in entrepreneurship, on average, and often operate smaller businesses in service sectors. Therefore, financial institutions tend to view women entrepreneurs as riskier. This leaves women entrepreneurs with few options for financing their businesses as other possibilities such as microfinance are not widespread.

These attitudes in financial markets stem from wider social views towards women’s labour market participation, especially women’s entrepreneurship. Women’s businesses are often not given sufficient priority by support providers often reflecting a concentration of women entrepreneurs in small-scale service businesses. This is a major obstacle for women entrepreneurs, who given the barriers to institutional finance, rely mainly on family finances when starting a business.

Conclusions

This note discusses some fundamental challenges faced by women entrepreneurs in accessing finance that stem from social and cultural conditions. First and foremost, there are important gender inequalities in the labour market and in care responsibilities that are not sufficiently recognised in the design and delivery of support programmes. For example, entrepreneurship financing schemes typically do not consider gender-specific needs nor the financial needs of different types of businesses. One of the main challenges is that entrepreneurship is often viewed as a “masculine” activity, and there is a high value placed on financial success and profits. Consequently, financial support programmes are often not easily accessed by women entrepreneurs. This creates a gap in the financial market for women entrepreneurs because there is little microfinance available in Czechia and little financial support for women entrepreneurs from within the household, as women are often viewed as caregivers rather than entrepreneurs.

Acknowledgement

This paper has received funding from the European Union’s Horizon Europe Research and Innovation programme under Grant Agreement No 101094812.

References

[8] CRIF (2022), CRIF: Českému podnikání i nadále dominují muži. Ženy vlastní pouze 18 procent firem, https://www.informaceofirmach.cz/crif-ceskemu-podnikani-i-nadale-dominuji-muzi-zeny-vlastni-pouze-18-procent-firem/ (accessed on 30 September 2024).

[7] CZSO (2023), Focus on Women and Men—2023, https://www.czso.cz/csu/czso/4-labour-and-earnings-xo7cv8pdcs (accessed on 30 September 2024).

[4] CZSO (2022), Česká republika v mezinárodním srovnání (vybrané údaje)—2022, https://www.czso.cz/csu/czso/prace-socialni-statistiky-p1ydtkoq9u (accessed on 30 September 2024).

[1] EIGE (2022), Gender Equality Index, https://eige.europa.eu/gender-equality-index/2022/CZ (accessed on 30 September 2024).

[6] Eurostat (2022), Children cared only by their parents by age group—% over the population of each age group—EU-SILC survey, https://ec.europa.eu/eurostat/databrowser/view/ilc_caparents__custom_9581692/default/table?lang=en (accessed on 30 September 2024).

[5] Eurostat (2021), Gender pay gap statistics, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Gender_pay_gap_statistics (accessed on 30 September 2024).

[3] ISSP (2012), ZA5900: Family and Changing Gender Roles IV, GESIS Data Archive, https://doi.org/10.4232/1.10079.

[2] MPSV (2022), Vybrané statistické údaje Počet příjemců rodičovského příspěvku podle pohlaví, https://www.mpsv.cz/vybrane-statisticke-udaje (accessed on 30 September 2024).

Note

← 1.  The study was based on an analysis of interviews with 18 experts (representatives of business support programmes, the financial sector, and non-profit organisations) that were conducted between 2015 and 2023 and focused on women’s access to finance for entrepreneurship or more generally on gendered barriers in entrepreneurship.