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    For decades, women moved steadily towards economic and social equality, but progress has slowed in the last 10 years. Pay gaps between men and women remain stubbornly high at 13% per hour in the European Union, and the difference cannot be explained by schooling or work experience alone. At the same time, fewer women work. The gender employment gap, or the difference between male and female employment rates, was 11 percentage points in 2021.

    Fewer women also start businesses, which is a shame because female entrepreneurs are often role models for women’s empowerment. Supporting female entrepreneurs can help close gender employment gaps and yield wider social benefits, such as lower poverty among women and children. Recent research by the European Investment Bank (EIB) also shows that female-led firms are more proactive environmentally and socially and are more likely to improve employees’ skills by investing in training.

    Overall, professional women lost ground during recent crises, such as the COVID-19 pandemic and the Ukraine war. The weight of juggling personal and professional duties strained their careers and businesses. Some women left the workforce entirely. Despite the stress, however, many female entrepreneurs have shown resilience.

    Going forward, women need support, public and private. Women-owned and -led businesses represent enormous opportunities to boost employment, promote balanced economic development and reduce poverty in the European Union and globally. Failing to fully realise women’s entrepreneurial potential comes at an enormous economic and social cost.

    About the report

    Support for female entrepreneurs: Survey evidence for why it makes sense examines the factors influencing female entrepreneurial activities. For its analysis, the report relies on three different surveys: the EIB Investment Survey (EIBIS) 2021, the EIBIS Startup and Scaleup Survey 2019 and the EBRD-EIB-World Bank Group Enterprise Survey for 2019  (along with the ES Follow-up Survey on COVID-19, which collected information on the impact of the COVID-19 pandemic). The unique combination of data helps shed light on structural issues hampering women-owned and led-businesses, the specific obstacles women entrepreneurs face and the fallout of the pandemic.

    Economic equality remains elusive

    Gender employment gaps are costly. Women are increasingly well-educated, and lower employment means that their skills are not being put to use. The economic losses stemming from the gender employment gap are estimated to be roughly €370 billion per year in the European Union. For women individually, not being employed raises the risk of poverty, as their failure to build up their own savings or to contribute to national retirement or unemployment plans increases their dependency.

    The difference between men and women is also fairly stark when it comes to entrepreneurship. Entrepreneurs dare to take risks, and they drive economic dynamism. Fewer women take this route. While women account for almost half of the world’s population, they represent a much smaller share of entrepreneurs. That share is particularly low in the European Union, as compared with the United States or the United Kingdom.

    One thing is clear: women-led firms employ more women. Data based on the Enterprise Survey show that this pattern is particularly pronounced in Central Asia and Central and Eastern Europe. It also holds across firms in different economic sectors. The EIB special survey on startups and scaleups confirms the same trends in the European Union.

    Better green and social returns

    Female-led firms also score higher on indicators measuring environmental, social and corporate governance. This is partly linked to the higher scores female-led firms get on social ratings for gender, simply because these firms have a better balance of women and men. However, gender balance is not the only driver. Female-led firms also outperform other firms in the likelihood of offering training to their workforce. And they tend to have higher scores on governance and the environment.

    The higher ESG scores attest to the broader benefits of female-led firms. For example, they are more likely to support the green transition by monitoring carbon emissions or by setting energy targets. Female leadership is also associated with firms disclosing more information on emissions and efforts to reduce energy use.

    Female-led firms are more likely to be innovative, introducing new products and processes. This is true for firms located in the European Union and in neighbouring countries. The findings counter longstanding perceptions that women are less innovative than men.

    Looking at samples of innovative firms, those that score high on indicators measuring good management or those offering training for employees, women are about 5 percentage points more likely to be in charge (compared with non-innovative firms, those with low management scores and those not offering training).

    Different financial challenges

    The kinds of finance women receive are different than men. While female-led firms report similar difficulties in getting finance as male-led firms, a closer look shows that the challenges facing women are not the same. Data from the Enterprise Survey indicate that women rely more on bank finance for investment and working capital, for example.

    Women-led firms in the most dynamic corners of the economy have difficulty raising adequate funds to start business and, later, to grow them. This suggests that the financial system does not serve female entrepreneurs particularly well. Instead, informal funding sources play a bigger role in the financing mix of women-led startups and fast-growing firms. External funding also tends to rely on debt instead of equity.

    In addition, female entrepreneurs are more likely to fund their businesses directly, contributing equity themselves or from their families and friends. Business angels, who often provide finance – as well as advice and access to business networks – to young firms play a much smaller role in the equity mix of startups founded by women.

    Pandemic impact

    The COVID-19 pandemic exacerbated some inequalities. Women who juggled multiple responsibilities – homes, children, elderly parents – often sacrificed financially. In the European Union, almost four in ten women said the pandemic took a toll on their personal income and one-fifth decided to permanently reduce the time they spent in paid work.

    The pandemic also hit female-led firms. EIB analysis shows that female-led firms were more likely to witness declines in sales or liquidity, even controlling for firm age, size and activity. Firms that cut staff during the pandemic were also more likely to be led by women. The impact is particularly strong in countries neighbouring Europe, which may reflect more limited support for business during the pandemic compared to the European Union. Despite the challenges, female-led firms have proven as able as male-led firms to adapt their businesses to online sales and new types of delivery.

    Creating the right conditions

    Supporting female-led businesses makes good economic sense, as these firms generate wider economic, social and environmental benefits. These firms also hire more women, increasing female participation in the labour force and helping to reduce poverty risks. But women need support – such as affordable, safe childcare – if they are to balance their careers and businesses with the demands of their personal lives.

    To effectively pull women’s skills, education and ideas into the economy, policymakers need to focus on three areas:

    • Step up efforts to help women’s businesses thrive and to create the conditions they need to remain in the workforce, despite recent setbacks;
    • Improve female-owned and -led firms’ access to finance and to business networks;
    • Close the gender gap in technological or digitally advanced firms, helping women play a more active role in these fields.

    In addition, governments need to ensure that the transition to a greener, more digital economy provides opportunities for women. That includes investing in women, who have a unique perspective on the climate emergency, and providing the right conditions for their businesses to grow.