What comes to your mind when you think of countries with the highest proportion of women entrepreneurs? Probably the US, UK, China or India?
Well, neither of them has the highest proportion. In fact, it's the continent of Africa that has the highest proportion of women entrepreneurs in the world, with OECD research revealing that more than a quarter of all businesses were either started or are run by women.?
For the unversed, OECD (Organisation for Economic Co-operation and Development) is an inter-governmental organization founded in 1961 to stimulate economic progress and trade between member countries.
According to the African Development Bank, nearly 26% (25.9%, to be exact) of women are in the process of starting or managing a business in sub-Saharan Africa. This makes Africa the continent with the highest percentage of women entrepreneurs in the world, the research report by OECD mentions.?
In Europe, by contrast, the rate of entrepreneurial activity among women is just 5.7%, per figures from the European Investment Bank, a Reuters report mentioned. Yet, despite those high levels of entrepreneurial activity, African women are short of funding.
As far as India and US are concerned, the proportion of women entrepreneurs is relatively less than in Africa. As per Bain & Company's report last month, women entrepreneurship in India is about 20%, whereas another report by the National Women's Business Council last year mentioned that women entrepreneurship in the US is 20.9%.
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While venture capital (VC) investment is only part of the picture, it¡¯s indicative that women founders receive less than 7% of all such funding in Africa (even though, as a survey by startup-focused publisher Disrupt Africa found, they make up around 20% of founders).?
That¡¯s indeed a problem, especially because women entrepreneurs are less likely to give up their businesses compared to their male counterparts, as per analysis by the University of Liverpool Management School. It¡¯s even more of a problem in Africa, where investing in entrepreneurs is crucial to fostering growth and development, a Reuters report mentioned.
So, why do African women receive so much less investment??
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Before digging into how and why African women entrepreneurs raise less funding than their male counterparts, it¡¯s worth noting that it¡¯s a problem around the globe. In the United States, the Carta Equity Report found that women represented 14% of solo start-up founders in 2021 but received just 2% of VC funding (as per Pitchbook data). The picture is even worse in Europe, where women also account for 14% of start-up founders but received just under 1% of total VC funding, the report mentioned.
Of course, there are other forms of investment and not every business is a start-up. But it¡¯s instructive that a sector that¡¯s supposed to be future-oriented and at the forefront of innovation struggles to invest in women at anything like the same rates that they¡¯re starting businesses.
But as far as Africa is concerned, there are other ways that investors can help increase investment in female-owned businesses. For instance, many African women entrepreneurs also have limited access to the kinds of business networks that can help them scale their businesses. By taking a more hands-on approach that extends beyond funding, investors can help ensure that the entrepreneurs they back are integrated into their broader networks.
Ultimately, there is a lot of entrepreneurial talent in Africa which shouldn't be wasted due to lack of investment. And this proportion of female entrepreneurs, which is currently nearly 26%, holds the potential to go even higher.
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