Women-Owned Businesses Lag Globally Despite Growth Potential

• Globally, women own one out of every three businesses
• There is a limited number of women-led businesses in various economies
• The study’s findings were shared in a blog post by The World Bank

Women own about one-third of all businesses in the world, but the presence of women-led businesses is low in various countries and industries, thus creating enormous potential for growth.

In this regard, a latest study on "Closing the Gender Gap in Entrepreneurship" has pointed out that the problems being faced by women entrepreneurs are all interconnected, and it is not possible to address them in isolation.

Rather, it is necessary to address them in a holistic manner, as emphasized in the study, as mentioned in the World Bank blog.

Studies have revealed that legal changes are important in improving the situation of women entrepreneurs. It has been observed that countries that have introduced legal changes in line with the Women, Business, and the Law initiative have seen a 10.6 percent increase in the probability of women holding equity in businesses.

Such legal changes can help bridge gaps in the levels of women-led business ownership in sub-Saharan Africa and the world as a whole.

Women's participation in entrepreneurship is hindered by many different barriers. For instance, 40 percent of economies have constraints on women’s economic activities, such as restrictions on the kinds of jobs they can take, or on the number of hours they can work.

As a result, many women's experiences in the workplace are restricted to informal employment. Another significant barrier to women's entrepreneurship is their inability to obtain financing. Globally, approximately 700 million women do not have bank accounts. Furthermore, women-owned small and medium-sized enterprises have an estimated financing shortfall of $1.9 trillion.

In addition to this, women typically encounter difficulties while applying for loans; they often face higher rejection rates, receive smaller amounts of loans, must provide stricter collateral than male applicants, and they are typically charged higher interest rates. Finally, women-owned startups receive less than 2 percent of the total amount of venture capital funding globally.

Because of the interconnected nature of the barriers that women face while seeking to enter the entrepreneurship field, responses must be holistic in order to be effective. Legal reform should include eliminating legal restrictions on women’s economic activity, equal property ownership, and inheritance.

Legal reform must also eliminate any form of discrimination relating to employment or the provision of credit to women entrepreneurs. Improvements to financial practices will include (but are not limited to) reduced bias in loan granting; the development of financial products that reflect the needs of women entrepreneurs; and the creation and enforcement of transparent assessment processes. Finally, targeted support is also being implemented in economies where governments link support to businesses with a requirement that they attend training or take part in capacity-building programs before being provided any support financing.