This report prepared by the OECD and the Global Women's Entrepreneurship Policy Network examines the barriers women entrepreneurs face in accessing financing for creating and growing businesses and explores the policy reforms governments can introduce to address them. The first part of the report provides international data and evidence on the rate and nature of entrepreneurship activities by women compared with men and the levels and types of finance accessed by women entrepreneurs. It further offers an international overview of the barriers to women entrepreneurship financing and the potential policy solutions. The second part of the report offers 29 country-specific policy insight notes from selected OECD and non-OECD countries prepared by academic experts. The notes cover countries such as Australia, Brazil, China, France, India, Malaysia, Nigeria, Poland, Sweden, Spain, the United Kingdom and the United States. Each note is focused on a specific thematic issue and aligned with the issues in the international overview. The themes covered are influencing attitudes and culture towards women entrepreneurs, the potential of fintech innovations, the need to better-target interventions to different segments of women entrepreneurs, boosting financial literacy, leveraging angel investments, boosting microfinance, and financing growth-oriented starts.
Bridging the Finance Gap for Women Entrepreneurs
Abstract
Executive summary
Despite a recent increase in the number of women entrepreneurs, there is still much room to increase the number and impact of new businesses created by women by addressing the barriers that women entrepreneurs face. In OECD countries, women were about 75% as likely as men to be starting or managing a new business during the period 2019-23. This is a slight reduction in the gap between men and women relative to the 2014-18 period when women were about 70% as likely. In addition, there are important differences in the nature and scale of businesses started and managed by women relative to those managed by men. These include, on average, lower levels of job creation, less innovation and fewer customers abroad. However, this picture varies greatly across countries, reflecting differences in context, such as cultural norms (e.g. norms pertaining to women’s participation in the labour market), labour market conditions (e.g. number and type of job vacancies), conditions for business creation (e.g. time and cost of starting a business), and the size of the informal economy (e.g. number of unregistered businesses).
The gap in the entrepreneurship rates between women and men have a cost for economies. For example, recent estimates in the United Kingdom suggest that about 12% of GDP would have been added to the economy in 2017 if women started and scaled businesses at the same rate as men.
Survey and transaction data consistently show women are less likely than men to obtain the finance needed to start a business. Women entrepreneurs are about half as likely as men entrepreneurs to report that they had borrowed funds from a bank to start, operate or expand a business and businesses owned or led by women receive only about 2% of total venture capital investments. Moreover, even when women succeed in securing loans and investments, they typically do so under less favourable conditions than men. For example, they often pay higher interest rates and are required to provide more collateral when they receive loans. In addition to the direct consequences of securing less funding, the financing gap also results in women entrepreneurs being less likely to seek investments or loans because they believe that they will not be successful.
The causes of the gap in entrepreneurship financing between women and men involve institutional and market failures on both the supply- and demand-side of financial markets as well as the specific characteristics of women-owned businesses (e.g. size and sector of the firms women entrepreneurs create and run). The issues include unconscious bias, such as stereotyping of women in lending and investment processes, and the lack of alignment of financial products and services with the needs of women-led businesses. Underlying some of the supply-side issues are an under-representation of women in lending and investment decisions as well as a lack of granular data to fully understand these issues and demonstrate the business case for financing women by demonstrating the viability of lending and investment to these businesses. On the demand side, the obstacles often stem from lower levels of entrepreneurship experience among women, participation in sectors that are characterised by lower profit margins and business survival rates, and reticence of women entrepreneurs to seek external finance. These factors can reduce the ability to identify potential funding sources, reduce the attractiveness of financing opportunities for finance suppliers, and negatively impact how business projects are pitched to lenders and investors.
There are several economic rationales for government interventions to improve women’s entrepreneurship finance. These involve addressing market and institutional failures, which include information gaps and asymmetries between entrepreneurs and investors, positive spillovers from women’s entrepreneurship such as innovation, job creation and economic diversification, and discrimination and bias in finance supply. If governments seek to strengthen the suite of measures and instruments used to support access to finance for women entrepreneurs, the policies and measures from around the world showcased in this report offer inspiration and lessons.
Consider a range of financing instruments
Many governments operate women’s entrepreneurship finance policy instruments, as shown in the policy insight notes in this report. The support landscape includes an evolving range of instruments. Key measures include loans, loan guarantees and microcredit. These are increasingly complemented by newer instruments such as fintech solutions and venture capital and angel investment for high-potential women-led start-ups. It is important that governments stimulate a range of financing instruments for women entrepreneurs to match the multi-faceted nature of financing needs and barriers and the variety of women entrepreneurs and contexts.
Developing women’s entrepreneurship financing and enabling a range of financing instruments are stressed in the OECD Council Recommendation on Gender Equality in Education, Employment and Entrepreneurship, the OECD Council Recommendation on SME and Entrepreneurship Policy and the OECD Council Recommendation on SME Financing.
Monitor finance gaps and barriers
Monitoring financial conditions for women entrepreneurs provides the evidence to support the delivery of effective finance policies, particularly for newer and rapidly evolving financial markets and products such as fintech. The OECD/European Union (EU) The Missing Entrepreneurs reports are important in monitoring trends in women’s entrepreneurship and policy developments internationally, including on the issue of access to finance. However, data on the supply and demand of financing of start-ups led by women remain under-developed. In response, the OECD engages in the Women Entrepreneurs Finance Code (WE Finance Code), a global multi-stakeholder effort launched in October 2023 that aims to collect gender-disaggregated data both at the national level through public national authorities and at more granular level through private financial institutions.
Better target financial support and create links with non-financial support
The report shows that existing policy measures are not reaching their full potential, in part because they are not sufficiently targeted to the specific needs of start-ups launched by women (e.g. amount of funding required, eligible sectors) and do not account for how women entrepreneurs access support services. This is illustrated clearly by the policy notes covering microfinance and growth-oriented finance, which discuss the challenges these types of instruments have in reaching women entrepreneurs. It can also be important to offer non-financial supports alongside improving financing supply, including making investments in financial literacy training or offering leadership training for high-growth potential women entrepreneurs alongside finance.
Address structural issues affecting access to finance for women entrepreneurs
There is also a strong need to address broader structural inequalities that often hinder access to finance for women entrepreneurs. This includes the gender imbalance in unpaid work and unequal access to property ownership rights, as well as differences in levels of entrepreneurship education and entrepreneurial networks. Greater efforts are needed to reduce unconscious gender bias in entrepreneurial ecosystems, which not only restricts access to capital but also leads to a self-restriction by women in their entrepreneurial ambitions. Governments can consider using packages of interventions that include education and awareness campaigns and leveraging the influence of community leaders and central financial actors to act as role models for the rest of the ecosystem.
Increase collaboration with private sector actors
Many of the policy notes in this report underline the important role of the private sector in access to finance for women entrepreneurs. One of the ways the public sector can better leverage private capital is by developing co-investment models with private investors, e.g. through contributing to venture capital funds or angel networks aimed at women entrepreneurs. One of the priority challenges is to address the under-representation of women in decision-making roles in equity investment, for example by setting targets for female representation, offering training for investment roles and supporting the creation of investor networks for women entrepreneurs who could invest in other women.
