Across the globe, women face more challenges that men accessing both basic financial services and capital for entrepreneurship. But that’s not the end of the story, nor is it slowing women down.

Women are starting businesses, and more banks and investors want to provide financial services tailored to women and reduce inherent biases in their investment processes.

As a starting point, women have generally fewer financial resources than men and face more hurdles in accessing services to finance and run businesses. Globally, women earn 63% less than men and have significantly less access to capital, with women in developing economies 20% less likely than men to have a bank account. Beyond basic financial services, women entrepreneurs face significant challenges in accessing capital to build their businesses. Across emerging markets, 30-37% of small and medium enterprises (SMEs) are owned by women, yet formal, women-owned SMEs face a US$287 million financing gap.

Women represent a huge underserved market.

To address this gap, many microfinance banks focus on providing financial services to women, with women making up 74% of microfinance clients across the globe.

Making Strides in Thailand

The Thai Credit Bank (TCB) is a good example of a financial institution addressing the gender gap. As the only commercial bank in Thailand focused on nano, micro and MSME finance, TCB provides loans and other products to underserved sections of society. Micro and small enterprises in Thailand often lack the credit history and collateral necessary to obtain loans from banks, and it is noteworthy that almost 60% of SMEs in Thailand are owned by women.

Furthermore, MSMEs owned by women face greater barriers to accessing finance than their peers owned by men: women account for US$37bn of the estimated US$41bn financing gap of MSMEs.

TCB’s initial public offering was supported by the UK’s Foreign Commonwealth and Development Office (FCDO) as part of the MOBILIST program. MOBILIST is focused on supporting investment solutions to deliver the capital needed to meet the sustainable development goals, through technical assistance, research, and equity investment into listed products.

“Women entrepreneurs have been historically overlooked by the banking sector, simply because of factors such as a lack of credit history,” says Palladium’s Johannes Olschner-Wood, who was involved in the deal. “This listing will hopefully support TCB’s growth, expanding financial inclusion and closing the gender gap in the process”

Beyond Small Businesses

The financing challenges faced by women are not unique to the SME space, nor to particular regions of the globe. In the UK, venture capital funds owned entirely by men raised about ten times more than those owned by women, and almost five times more than funds owned by both men and women. In the US, a study by Harvard in 2019 found that businesses founded by all-women teams receive only 2.3% of all venture capital funding, and mixed gender teams only 10.4%.

Despite this, ventures founded by women perform just as well as those founded by men.

In the United States, Black female entrepreneurs (BFEs) face particular challenges raising capital due to both their gender and race. This demographic faces the widest funding gap between capital sought and capital raised. A report by Palladium for the UK government highlighted supply-side challenges including investor bias, mismatch of investment models and BFE business models, and investment processes that are inappropriate for BFEs.

“Yet, access to funding is essential for Black female entrepreneurs because it is not merely about levelling the playing field; it's about recognising and investing in the untapped potential and innovation that they bring to the table,” explains Palladium’s Jesse Opoku-Asiedu. “By providing the necessary financial resources, we not only empower these women to realise their entrepreneurial dreams but also foster economic growth and diversity that benefits society as a whole.”

Since the report was published there have been some improvements. “We've witnessed encouraging progress in access to funding for BFEs,” says Opoku-Asiedu. “Post the COVID-19 pandemic, several organisations have taken active steps to dismantle inherent biases within the investment process, eliminating barriers that keep capital from BFEs.”

While these efforts are commendable, Opoku-Asiedu says they represent incremental rather than transformative change. “What we aspire to witness is a profound shift in the landscape, where a significantly larger number of women entrepreneurs gain access to financing. Extensive research underscores the pivotal role of women in shaping an economic future where prosperity is widespread and sustainable.”

While women across the globe continue to receive less investment than men, there are promising signs that the landscape is improving. More opportunities to invest in women are becoming possible through programs such as MOBILIST, and investors are becoming more aware of their unconscious biases.

For more, read 'Can Funding Black Female Entrepreneurs' Businesses Help Address Systemic Racism?' or contact info@thepalladiumgroup.com.