Women approach risk differently than men and banks need to take note.
A study, A Force to Reckon With: Women Entrepreneurship and Risk, found female entrepreneurs to “perceive risk both in terms of economic and social value, which differs from traditional approaches that consider risk mainly from an economic point of view.”
Released this month, the study was a collaboration between BMO Financial Group, Carleton University and the Beacon Agency.
The authors learned that women entrepreneurs have difficulty securing funding from financial institutions because they are risk averse but in reality, they approach risk differently.
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Researcher Clare Beckton of Carleton University said women consider how growth will impact their family.
They often slow the growth of their business to accommodate their lifestyle and they often self-fund their enterprise, which can also have the affect of slowing their business’s rate of growth.
“Women are ambitious and want to grow their businesses, but they make decisions to take on risk to meet their goals,” she says.
Since 2007, the number of self-employed women with an incorporated business in Canada has increased 15 percent.
The reasons for women starting businesses vary and their approach to growth tends to be non-traditional. They don’t consider failure an option and will do whatever it takes to succeed from bartering for services to sleeping on a friend’s couch until the business gets off the ground.
The study also found female business entrepreneurs approach securing financing differently.
Women focus on relationships with both customers and financial institutions as they develop their business. Without a connection, they often feel frustrated when they attempt to access needed capital.
Susan Brown, senior vice-president and head of BMO Woman’s Strategy, says her bank is already modifying its approach to dealing with woman entrepreneurs as a result of this report.
“We have set $2 billion in capital aside to support women in business and we have already lent out three-quarters of it,” she says.
In 2014, Ontario had the highest concentration of self-employed women, followed by British Columbia, Alberta and Quebec. The research did not delineate between rural and urban female-operated businesses.
“Female entrepreneurs are an important group, not only to BMO, but to Canada as a whole,” says Brown.
The study’s authors recommend mentor programs to help women gain confidence, educational opportunities supported by financial institutions on risk analysis, financial literacy and leverage funding for growth.
It also said that lenders adopt relationship-based approaches and improve communication between financial institutions and women entrepreneurs to facilitate funding.
- In 2012 in Canada, 950,000 women were self-employed, accounting for 35.6 percent of all self-employed persons.
- In 2012, 47 percent of small and medium-sized enterprises were entirely or partially owned by women.
