The age-old twin problems of bias and marginalisation continue, scarcely interrupted in almost every facet of life. Despite some progress that has been made across the board, the problem has historically been most pervasive in the broadest categories of people – gender. Unfortunately, it persists there, glaringly in the matter of access to finance.
Globally, women’s access to finance remains disproportionately low. In 2017, for instance, the World Bank reported a substantial jump in the number of people with bank accounts – up by 1.2 billion from 2011—but there is still a 9 percent gap between women’s and men’s access.
Furthermore, a recent Global Findex report by the Bank points to more than 1 billion women, who still do not use or have access to the financial system.
This is even more pronounced in developing regions, with only 37 percent of women in sub-Saharan Africa, owning at least one bank account, compared with 48 percent of men.
The pattern is corroborated by the International Finance Corporation (IFC) which estimates that “a US$300 billion gap in financing exists for formal, women-owned small businesses, and more than 70 percent of women-owned small and medium enterprises have inadequate or no access to financial services.”
Similarly, the Africa Development Fund pegs the financing gap for African women across business value chains at an estimated US$42 billion, including US$15.6 billion in agriculture alone. These disparities have only worsened with the disruptions caused by the COVID-19 pandemic, generating what has been described by some as a ‘she-cession’, as job losses were disproportionately against women, across diverse demographic segments.
Tech to the rescue?
The advent and exponential growth of the digital economy were supposed to remedy the situation ostensibly by reducing existing barriers to access, amongst other things. The data, however, suggests otherwise.
According to an In Search of Equity report by the World Bank’s Africa Gender Innovation Lab (GIL) and the market intelligence firm Briter Bridges, published late 2021, despite African startups raising US$1.7 billion between early 2013 and mid-2021, investments into all-female early-stage startups in that period accounted for a paltry three percent versus 76 percent going to all-male founding teams, with 23 percent going to often-male heavy mixed teams.
The above, the report adds, works out to US$1 going to all-female founding teams, versus US$25 to all-male teams.
Accessed from weforum.org
The report debunked the argument that the phenomenon is solely driven by the number of women represented, as it showed that the amount of funding they received is disproportionately small as all-female teams accounted for 11 percent out of the 2,400 companies surveyed.
If the numbers did not make for grim reading already, in the record-setting year for African startups that was 2021 – where more than US$4.3 billion in venture capital was raised by early-to-mid stage startups, 93 percent of the funding went to startups with male Chief Executive Officers (CEOs).
Noticeably, there is a sector disparity with the most popular category, fintech – with more than half the share of funding – recording 98.5 percent of the funding going to firms with male CEOs.
Even in sectors where women are more represented, that is, health and education, there was still overwhelming male domination. With 71 percent and 75 percent of funding going to establishments with male CEOs in healthtech and edtech respectively.
The most startling aspect of the report, however, is the variance between the type of funding that male and female startup leaders sought to attract and the rationale behind their decisions.
“In our sample of 172 entrepreneurs, male and female founders followed different financing
paths. Female founders in our sample were less likely to pitch for equity investments than male
founders. Conversely, they were more likely to apply for bank loans, or to prefer growth from retained earnings,” the report reads in part.
“A confidence gap separates female and male founders in our sample. Female survey respondents showed less confidence in their ability to pitch to investors and in their firms’ ability to grow. This confidence gap exists despite the fact that women entrepreneurs in the sample were more educated, had the same amount of professional experience as male founders, and experienced similar revenue changes in the previous year,” it further disclosed.
The above showcases, in the most glaring terms, that the problems are systemic and persist beyond the tech ecosystem.
More women, no problems?
“Get more women into the ecosystem,” has often been sold as the silver bullet for the problem we have on our hands. After all, the aforementioned report showed that the number of female co-founders of early-stage firms in high-growth, technology-driven industries remain low. Women accounted for 16 percent of founders in this category for 2021.
But with women surveyed in the report having higher academic qualifications than their male counterparts, as well as demonstrating their competence, it raises the question, “What else is missing?”
Casual conversations on the subject suggest that investors are not solely concerned about the academic or technical competencies of the leaders of the startups they choose to fund but seek safety in what is assumed as traits required to navigate the tempestuous waters of growing a business, especially in regions where the ease of doing business is poor.
The theory is however untenable as women business owners across the continent, and many in Ghana, have shown that across diverse sectors and with a variety of funding sources, they are able to grow thriving and profitable businesses; the goal of venture capital funding.
There is a growing body of evidence of the far-reaching benefits of more women-led and gender-diverse businesses. For instance, a McKinsey & Company report on ‘Delivering through Diversity’, and cited by Forbes, showed that “companies with higher executive-level gender diversity worldwide are 21 percent more likely to outperform their peers in EBIT (earnings before interest and taxes) margins and are 27 percent more likely to outperform peers in long-term value creation.”
A Boston Consulting Group study published in 2017 and cited by the World Economic Forum found that companies with more diverse management teams have 19 percent higher revenues due to innovation. These and many more suggest that investors, businesses, and the wider economy would be better off with accelerated and sustained access to finance by women in and outside of early-stage firms in high-growth, technology-driven industries.
International Women’s Day, IWD 2022, might be a good time to #BreakTheBias for economic prosperity across the board.
