Closing the gender gap in financing. A topic that is very close to my heart today but a topic that I didn’t know much about a few years back. I cannot say I am an expert on it yet, but I understand it well enough to say that it is both complex and nuanced at the same time as being simple and intuitive.
So, what is the gender gap in financing? An internet search on this topic reveals that there is gender gap in access to finance, gender gap in financial inclusion, gender gap in financial sector and even gender gap in financial literacy, gender gap in financial outcomes and gender gap in access to bank credit. Whatever be the role of finance, there is a gender gap. And women have lesser access to finance, regardless of who these women are, what they seek the funds for, and how they are accessing it.
Now that is a broad and sweeping statement so let us examine it a little closely. Here is what data says. Out of the total entrepreneurs in India, only 14% are women. One might say that the pipeline is shallow and not many women turn entrepreneurs. So, let’s see this data point: according to Crunchbase global VC funding for women-led startups hit an all-time high of 2.8% in 2019, only to start sliding back – the percentage stood at 2.3% in 2020. One could still argue that not only are there fewer women entrepreneurs, there are also fewer women in tech. Now let’s see this data point: IFC has estimated that worldwide, a $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. The existence of a substantial gap is impossible to deny. At the same time, the ginormous size of the challenge makes it an incredibly important one to solve.
Some of the core factors contributing to gender gap in financing are age old stereotypes and socio-economic factors that have deprived women of the opportunity to study, opportunity to work and frequently, of the opportunity to accumulate and manage their own wealth. This has meant that for decades now, running businesses for profit, doing deals and controlling own wealth was largely a man’s purview. Fast forward to today, here is the percentage of women running large businesses as CEOs: 8.2% in the Fortune 500; 7.3% in the Fortune 1000; 6% in the S&P; 5.6% across the Russell 3000; and 7.4% at private companies with revenue over $1 billion, says a Women Business Collaborative report. Per Preqin, women occupy less than 10% of senior roles in PEVC and according to a 2021 billionaire census, women make up 11.9% of the billionaire cohort.
It is a self-perpetuating cycle that needs to be disrupted. For many years now, governments, public bodies and NGOs have been working on raising awareness and trying to change some of these societal norms. But changing the fabric of society takes a couple of generations and people like me don’t want to wait that long anymore.
We need to approach the problem differently. How about complementing ongoing efforts with basic business friendly tools that can be adopted across the corporate world? Simple tools that can be used by investors, startups, large mature corporates, all alike. For example, a powerful tool to adopt would be for corporates to start measuring and tracking employee data on a gender segregated basis. The data is available in most cases, and the very act of measuring and becoming aware of where the organization stands can create the required awareness and kickstart action.
Recruitment is another area with a tremendous opportunity. If recruiters focus on the fact that women are roughly 50% of the workforce and that the percentage of women in business schools has climbed to hover between 35-50% - and that it makes perfect business sense to tap into a 100% of the talent pool out there. Instead, what we have seen in recent times are the birth of a fresh set of stereotypes, centred around “diversity hiring”. One step forward, two backwards!
Another cliché associated with hiring women centers around maternity benefits, and many are dismayed with how organizations fail to take a big picture view to this. With the paucity of return-to-work support, the rate of returning mothers is negligible for most organisations. Did you know that actual, total costs associated with individual turnovers can range from 90 to 200 percent of the employee's annual salary? While India has no labor shortage, talent is in demand and in very short supply. As per the ManpowerGroup Employment Outlook Survey, 89% of employers in India are struggling to fill vacancies – above the global average of 69%.
In an average career span of 40 years, a woman will take maternity breaks for say 2 years. Yet, it seems that the outcome of her professional career, whether she makes it to the top or not, boils down not to a whole of what she accomplishes in these 40 years – but in these 2 years when she will be doing what men cannot.
But in my view, the most critical piece hinges on having more women in decision making roles. Women as owners/ founders/ promoters, women at the CxO levels, women as decision making investors, women on boards, women in policy making. Having more women in leadership roles creates a virtuous cycle of inclusive decision making, a culture devoid of biases and stereotypes and strong role models for younger women, which in turn leads to a more diverse workforce and designing of inclusive products and services. And let’s not forget, workplaces are a part of society too. Change need not only begin at home; change can also be taken home.
(The writer is a Private Equity Investor and Founder of WinPE - a not-for-profit platform, which promotes transformation in the investing world in favour of gender diversity.)
So, what is the gender gap in financing? An internet search on this topic reveals that there is gender gap in access to finance, gender gap in financial inclusion, gender gap in financial sector and even gender gap in financial literacy, gender gap in financial outcomes and gender gap in access to bank credit. Whatever be the role of finance, there is a gender gap. And women have lesser access to finance, regardless of who these women are, what they seek the funds for, and how they are accessing it.
Now that is a broad and sweeping statement so let us examine it a little closely. Here is what data says. Out of the total entrepreneurs in India, only 14% are women. One might say that the pipeline is shallow and not many women turn entrepreneurs. So, let’s see this data point: according to Crunchbase global VC funding for women-led startups hit an all-time high of 2.8% in 2019, only to start sliding back – the percentage stood at 2.3% in 2020. One could still argue that not only are there fewer women entrepreneurs, there are also fewer women in tech. Now let’s see this data point: IFC has estimated that worldwide, a $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. The existence of a substantial gap is impossible to deny. At the same time, the ginormous size of the challenge makes it an incredibly important one to solve.
Some of the core factors contributing to gender gap in financing are age old stereotypes and socio-economic factors that have deprived women of the opportunity to study, opportunity to work and frequently, of the opportunity to accumulate and manage their own wealth. This has meant that for decades now, running businesses for profit, doing deals and controlling own wealth was largely a man’s purview. Fast forward to today, here is the percentage of women running large businesses as CEOs: 8.2% in the Fortune 500; 7.3% in the Fortune 1000; 6% in the S&P; 5.6% across the Russell 3000; and 7.4% at private companies with revenue over $1 billion, says a Women Business Collaborative report. Per Preqin, women occupy less than 10% of senior roles in PEVC and according to a 2021 billionaire census, women make up 11.9% of the billionaire cohort.
It is a self-perpetuating cycle that needs to be disrupted. For many years now, governments, public bodies and NGOs have been working on raising awareness and trying to change some of these societal norms. But changing the fabric of society takes a couple of generations and people like me don’t want to wait that long anymore.
We need to approach the problem differently. How about complementing ongoing efforts with basic business friendly tools that can be adopted across the corporate world? Simple tools that can be used by investors, startups, large mature corporates, all alike. For example, a powerful tool to adopt would be for corporates to start measuring and tracking employee data on a gender segregated basis. The data is available in most cases, and the very act of measuring and becoming aware of where the organization stands can create the required awareness and kickstart action.
Recruitment is another area with a tremendous opportunity. If recruiters focus on the fact that women are roughly 50% of the workforce and that the percentage of women in business schools has climbed to hover between 35-50% - and that it makes perfect business sense to tap into a 100% of the talent pool out there. Instead, what we have seen in recent times are the birth of a fresh set of stereotypes, centred around “diversity hiring”. One step forward, two backwards!
Another cliché associated with hiring women centers around maternity benefits, and many are dismayed with how organizations fail to take a big picture view to this. With the paucity of return-to-work support, the rate of returning mothers is negligible for most organisations. Did you know that actual, total costs associated with individual turnovers can range from 90 to 200 percent of the employee's annual salary? While India has no labor shortage, talent is in demand and in very short supply. As per the ManpowerGroup Employment Outlook Survey, 89% of employers in India are struggling to fill vacancies – above the global average of 69%.
In an average career span of 40 years, a woman will take maternity breaks for say 2 years. Yet, it seems that the outcome of her professional career, whether she makes it to the top or not, boils down not to a whole of what she accomplishes in these 40 years – but in these 2 years when she will be doing what men cannot.
But in my view, the most critical piece hinges on having more women in decision making roles. Women as owners/ founders/ promoters, women at the CxO levels, women as decision making investors, women on boards, women in policy making. Having more women in leadership roles creates a virtuous cycle of inclusive decision making, a culture devoid of biases and stereotypes and strong role models for younger women, which in turn leads to a more diverse workforce and designing of inclusive products and services. And let’s not forget, workplaces are a part of society too. Change need not only begin at home; change can also be taken home.
(The writer is a Private Equity Investor and Founder of WinPE - a not-for-profit platform, which promotes transformation in the investing world in favour of gender diversity.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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