How Fintech is Closing the Gender Gap in Business Funding

It’s 2019, and yet female small business owners are still experiencing gender bias when it comes to accessing business funding.

In recognition of International Women’s Day on Friday 8 March,  Spotcap has gathered some of Australia’s most prominent female business leaders, founders and CEOs, to hear their experience accessing business finance, their thoughts on how we can overcome the gender gap in this area and their business advice to other aspiring female business professionals.

In Australia, the number of female-run small businesses has grown by 46%, which is almost double of that to men over the same period of time. Despite this, research suggests that simply being female significantly reduces the probability of being approved for business finance.

Approval rates for women are 15-20% lower than male-led businesses, according to international online credit resource, Biz2Credit, and a 2017 study from the Asian Development Bank Institute, showed that women-owned enterprises are unconditionally less likely to obtain bank finance.

The funding gap

For some women, accessing funding for their business has been a difficult journey and one rife with gendered assumptions.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman, said of her own experience: “When I got my first business loan, three banks knocked me back on the basis that I was 25 and a woman. There were a couple of questions in there like ‘when are you having babies?’”

Siobhan Hayden, Chief Operating Officer of online mortgage marketplace, HashChing, had a similar experience, revealing she was “asked if I needed my ‘husband’ to sit down with me to finalise a car purchase in the last 12 months”.

“Tragically, unconscious gender bias continues, and these traditional views have no utility pervading business funding decisions”, Siobhan added. “If we allow this to prevail, we risk missing out on up to 50 per cent of the innovative potential around us.”

Access to business funding is often critical to helping enterprises succeed, so it’s vital that female-led businesses have the same opportunity to reach their potential as male-led enterprises.

Kendall Flutely, founder of online financial education platform Banqer, said: “Whether it’s spoken, unspoken, recognised, or ignored, the bias is alive and as a female founder, this is unsettling.”

Females powering the economy

George McEncroe, the founder of Australia’s only female ride-share business Shebah, said fair access to funding for female-led businesses is critical to the health of Australia’s economy.

“If women-led companies can’t access finance, it is not just a human rights deficit, it’s a huge economic opportunity lost as well. Women are not niche in business anymore” explained George.

Bianca Hartge-Hazelman, founder of female finance publication, Financy, believes the economic progress of Australian women is on the forward march. She revealed: “According to the Financy Women’s Index, we have a record number of women in full-time work, studying at universities and occupying ASX200 board positions. The economic benefits to the country and indeed families in supporting women in business is massive.”

Shahirah Gardner Co-Founder of social payments app, Finch, said: “Female-led businesses aren’t just companies that commercially outperform competitors, these are companies driving fresh perspective and positive change. It is important they have access to the finance they need to build successful businesses so others can take their lead.”

The next generation of female business leaders

As role models and mentors, women can shape an environment that inspires and supports more women to reach their own business aspirations.

Kate Carnell recognises the importance of female networks, urging the need for more “female small business owners to help each other; older successful women should mentor younger women in their sector. A problem shared is a problem solved.”

Finch’s Shahirah Gardner knows first-hand, that the “entrepreneurial journey can be an isolating one, and we tend to forget that we’re not the first to go through it! Lean on your community and network and you’ll be surprised at how many people are willing to support you.”

This sentiment was echoed by Kendall Flutely of Banqer, who said: “I know I benefit directly from the work of some incredible women who went before me both in tech and business.”

“My advice to women in business starting or scaling would be to be fearless, courageous, and don’t only change the world for you but all other female founders after you.”

How fintech is closing the gender gap

The massive rise of finance and technology organisations, or ‘fintechs’, in Australia has been an instrumental part of pushing the financial industry to facilitate a fair lending experience.

Traditional loan processes often require face-to-face meetings, potentially subjecting women to unconscious and conscious bias.

However, a growing number of online business lenders are helping to eliminate gender bias from the business funding process by focusing solely on data and a business’s real-time performance.

As a result, female business owners not only benefit from greater fairer access to finance, but according to the Asian Development Bank, they also have a better chance at approval.

Kate Carnell said: “Women might be more cautious in seeking finance for their business, but when they do, watch out… they are very serious about expansion and growth. Women see problems and create opportunities to fix them.”

Linh Bergen-Peters, Chief Marketing Officer of Spotcap, said: “As an industry, we hold the keys to achieving #BalanceforBetter when it comes to improving access to finance for all. The time to start the conversation is long overdue.”

For more quotes, advice, and other resources for small business owners this International Women’s Day, visit Spotcap’s IWD Hub.