Economy is victim as women denied loans

By Ariel Alexovich

Date: 27/10/05

Europe's banking services industry is not doing enough to help provide start-up loans for female entrepeneurs, according to a Commission-sponsored forum in Brussels.

French socialist MEP Catherine Guy-Quint said females were being denied start-up loans 30% more often than males, a fact she called "particularly ridiculous" because "if money is given to a woman business leader, the success rate is almost 100%".

Figures from a study presented to the forum last Friday (21 October) showed that the percentage of self-employed women in the UK was unchanged from 1992 to 2005, at 7% of all economically active women and 26% of the total self-employed population.

Professor Sara Carter of the Centre for Entrepreneurship at Scotland's Stirling University, which carried out the study, said women's higher start-up loan interest rates combined with a lower rate of loan approval and a lack of business education were to blame for this under-representation of female entrepreneurs.

"Undercapitalisation leads to more failed businesses," Carter said. "Women think they're being smart by not taking out a big loan, but in actuality, businesses fail because they run out of money."

While the Stirling study found no deliberate discrimination by UK bank loan officers towards women entrepreneurs in lending decisions, Carter said a strong focus on the "character" of applicants invited unconscious gender prejudices.

A previous study at Warwick Business School discovered differences between the sexes in start-up loan interest rates.

Miriam Arnau of FEM-UEAPME, representing female Europeans of small- and medium-sized enterprises (SMEs) told the conference's overwhelmingly female audience that the EU should provide more financial education to potential businesswomen.

"In no town in the EU can you have sustainable development if you don't have female entrepreneurs," Arnau said. "Women create wealth. We have to promote and create measures to allow female-run microcompanies to be successful in the first three years of life."

Maive Rute, the European Commission's envoy for SMEs said improving access to finance was a priority in the Commission's actions.

She promised that the role of women would feature in a new Commission-backed SME policy to promote a more entrepreneurial culture in Europe.

But Madi Sharma, who runs her own food import business in addition to being a member of the European Economic and Social Committee (EESC), demanded more accountability from the EU.

Referring to past investigations into female entrepeneurship, Sharma said: "Where's the action, the analysis of research we've spent on raising the profile of women in business?"

Women get fewer start-up loans because fewer women want them, said Vera Schubert of KfW Bankengruppe, who agreed that women were "under-represented" in business, with women establishing 35% of new business in Germany despite comprising 45% of the total workforce.

She said this was partly because of subs- tantial differences in male and female self- assessment, as 51% of women saw themselves as unqualified to be entrepreneurs, compared with 31% of men.

"Either women underestimate their abilities, or men overestimate theirs," Schubert said.

Article takes a look at the difficulties female entrepreneurs face in Europe when trying to get start-up loans.