How to bridge the gender financing gap

Published: Friday, September 1, 2023

Business Community DevelopmentBanking EconomyFinancial Services

`Why Female Founders are Still Not Raising Financing Equitably in 2023`

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According to a report published by the International Financial Corporation (IFC) in 2019, South Africa had a USD$49-billion unmet financing demand for female founders, making it evident that there is a massive female-founder financing gap. This disparity often leads to low growth margins for female-founded businesses as they rely on alternative sources of funding (Halabisky D., & Potter J., 2021).

For that specific reason, Future Females Empowerment Initiatives, in partnership with the International Tech Hub Network, a UK Government Initiative conducted research on 'Why Female Founders are Still Not Raising Financing Equitably in 2023'.

The overall research, which consisted of surveys with open-ended and multiple-choice questions, was conducted with five International Tech Hubs:

  • South Africa
  • Brazil
  • Kenya
  • Indonesia, and
  • Nigeria. 

 

Three important questions were identified:  

  1.  What is the current financing gap for female founders globally? 
  2.  What are the barriers faced by female founders in raising funding? 
  3.  Why have the existing interventions that target these barriers been unsuccessful? 

 

It revealed that female founders across the five countries are mainly bootstrapping their businesses to keep them operational and have raised an average of less than USD 10 000 to date. Furthermore, 95% of female founders are still actively looking for funding but most of them struggle with identifying the funding opportunities available and how to connect with these opportunities. Plus, they are unfamiliar with the fundraising process and its requirements. 

There is a wide gap between the current form of business financing that female founders use and the type of funding they need to grow their businesses. The survey data yields extensive insight into the amount of funding raised to date across business stages and the various sectors in which female founders operate. 

The research identified the following key reasons that inform the funding gap that female founders face in South Africa: 

1. Lack of comprehension of the fundraising process 

Only 19.5% of the female founders surveyed reported confidence in their ability to go through the fundraising process. (This number rises to 46% of questioned candidates in Kenya)

All other founders surveyed indicate needing help with the fundraising process, from grant proposal writing to pitching with 30% saying that they can't go through the process by themselves. 

2. Lack of information on investors

There is a gap in information about the funding opportunities available to female founders and the types of investors to approach. Forty-two percent of female founders report they do not know relevant investors to approach, (an increase of 29.4% from Brazil). In the same vein, 39.6% report that they choose to stick with their current form of funding because they do not know how to access any other form of funding, although a high percentage (91.8%) would welcome it. 

3. Experienced gender bias

Though there is no explicit evidence of gender bias in our survey, 71.7% of South African female founders interviewed for the report say that they feel the fundraising process is more difficult because they are women. (This is higher than that of Indonesia where 45.6% feel this is a factor) 13.2% say their biggest challenge is that investors do not take them seriously. 

It is clear that female founders face big challenges globally in raising funding, especially when it comes to being educated on the funding process since a big gap in educational programmes persists. 

The result of the South African whitepaper explores why female-led businesses locally are still not successful in accessing finance for their businesses. The series, consisting of a white paper for each of the five participating countries, includes:

  • insights on the current funding needs of female entrepreneurs
  • how these are or are not matching the funding that is available in the market
  • commentary around "the gap", and
  • why previous interventions failed to close this gap. 

 

Thereafter it provides solutions to target these shortfalls and how female founders can draw on the resources available to them, requiring a multi-dimensional approach. This undertaking integrates female founders, startups and / or SME enablers such as incubators, accelerators and investors. The integration allows for information on funding opportunities to flow freely between investors and female founders, with enablers working as binding agents that train them on the fundraising processes and facilitate investor-founder matchmaking.

"After receiving repeated feedback about funding from our community, we were very excited to finally explore why — after so many efforts from the entrepreneurial ecosystem, there is still a gap between male and female funding. We are delighted to share the findings with everyone and specifically the key players in the field; the startup enablers, the entrepreneurs themselves and the different funders — banks, grants and investors," says Cerina Bezuidenhout, co-founder and COO of Future Females Empowerment Initiatives.

Bezuidenhout concludes, "May everyone who reads this, feel they know better now how to close this gap. Future Females vouch, as an education platform, that we will support women and work with partners to educate women in the fundraising process, and we are happy to work with any partner who shares this goal."

The full white paper series on  'Why Female Founders are Still Not Raising Financing Equitably in 2023' White Paper reports can be accessed here.

For more information, visit www.futurefemales.co

Image courtesy of Canva.

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