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Female entrepreneurship

It’s time to challenge the stereotypes about women and financial risk

13 May May 2016 1231 13 May 2016
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Despite the number of self-employed females increasing over the last two decades, the dominant rhetoric that women are risk-averse continues to undermine women’s ability to seek funding for both start-ups and growth.

According to the recent Global Entrepreneurship Monitor, women are nearly one-third more likely to start businesses out of necessity than men. In six economies (Vietnam, Philippines, Thailand, Malaysia, Peru and Indonesia), women show equal or higher entrepreneurship rates than men. However, the assumption in business and academic circles that women entrepreneurs are risk-averse negatively impacts assessments of women's entrepreneurship and their ability to seek funding for both start-up and growth. It would imply that greater risk seeking is an essential characteristic of masculinity.

But looking through a database of 360-degree assessments from 75,000 leaders around the world, a new study challenges this stereotype. In an article for the Harvard Business Review, the researchers explain their findings: “On average, women rank in the 52nd percentile on the boldness scale, just higher than men who are in the 49th percentile. It’s important to note that because of the imbalanced gender ratio of senior executives, there were nearly twice as many men in our data set as women”.

The researchers wanted to dig a little deeper, and explore how this gap played out in different business sectors. They found that bold behavior increased for women in male-dominated sectors, and it was especially strong among younger women. “It would seem that to be a younger woman in a male-dominated fields requires a fairly bold personality, a willingness to challenge the status quo, push harder for results, and do something out of the ordinary”.

But the fact that women calculate risk more carefully and more judiciously, isn’t that a good thing? A new independent study, conducted by BMO Financial Group, Carleton University and The Beacon Agency, which included interviews with more than 100 male and female entrepreneurs from across the country, found that women entrepreneurs in Canada have difficulty securing funding from financial institutions because they are mistakenly perceived as risk averse and unable to generate the same economic growth as men.

In fact, in many instances women entrepreneurs reported that they often find the process of seeking a business loan very onerous and they often feel humiliated by the application forms and how they feel treated by front-line staff. The theme that women entrepreneurs face obstacles in securing loans from banks was echoed by more than 80% of the women interviewed for this study. This finding is similar to other reports that have looked into women entrepreneurs' financing approaches. Because of the lending attitude of banks toward women entrepreneurs’ businesses, the report says, many women prefer to arrange funds by themselves. They try to use their personal credit cards and lines of credit, loans from family and friends, funds from government grants, Futurepreneurs, Women's Enterprise centres and other similar organizations. Crowdfunding has also been identified as a potential source of funding for female entrepreneurs to overcome financial obstacles for starting-up and growing their businesses.

That said, the study calls on banks and other investors to take a more “holistic” approach to assessing female-run companies instead of merely assuming they are risk averse, because female entrepreneurs tend to be not only interested in the earning statement for their business, but also the impact of their business decisions on all aspects of their lives. “For example, risk is often described by women as hiring the right person, having a debt, or the implication it may have on her family or the reputation of the company”.

In conclusion, it is generally argued that stereotyped beliefs in the existence of sex-based differences may lead to discrimination against women and limit their economic opportunities.

Photo Caption: 27 year old Afghan entrepreneur Hassina Syed

Photo Credits: Getty Images

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