Would it surprise you to learn that women in Canada start and operate businesses with 53 per cent less capital than men, on average?
Women-owned businesses also receive 31-per-cent smaller loans than businesses owned by men, and less than 2.7 per cent of the venture capital.
When you add in systemic issues faced by black, Indigenous and women of colour, the business funding gap is even greater. Almost 80 per cent of black women entrepreneurs across Canada say that access to financing is the key barrier to growing and sustaining their ventures. Only 10 per cent of Indigenous women founders have accessed financing at any stage of their enterprise. And a recent study showed that lesbian, bi and trans women raise 22 times less capital on average than their gay male counterparts.
At The Forum, a national charity that supports more than 1,600 women entrepreneurs each year, we are trying to change all that. We recently launched the AFIA DEI Index, a package of tools and services for business funders who want to increase inclusion and access to capital for a diverse range of women business founders.
AFIA stands for accelerating financial inclusion and access. We created the AFIA to engage funders across the country in closing the funding gap and together build a new vision for how women entrepreneurs are supported.
Over the last year, we brought together leaders from the financial industry, the entrepreneur support ecosystem, and diversity, equity and inclusion (DEI) experts to collaborate on developing AFIA. BMO, Vancity, National Bank, TD and the Business Development Bank of Canada were involved; so were Black Entrepreneurs and Businesses of Canada, the Canada LGBT+ Chamber of Commerce, the Women Enterprise Knowledge Hub (WEKH) and Women’s Economic Organizations of Canada (WEOC).
The Forum’s extensive community of more than 14,000 women, trans and non-binary entrepreneurs provided insights into how funders could better serve them. Black and Indigenous women told us about the overt discrimination they experience at financial institutions, including being questioned about where they got their money from or not being offered the same services as other women.
We need to address the personal, societal and economic costs of undercapitalization of women’s businesses. Women are starting businesses in greater numbers than ever with a 30-per-cent increase in women-owned ventures over the last decade. Black women account for about 42 per cent of new women-owned businesses in Canada, with newcomers from places like Nigeria and Jamaica leading the way. The proportion of women-owned businesses is also growing. WEKH researchers estimate that 18 per cent of Canadian businesses are majority woman-owned in 2023, compared to 16.8 per cent in 2020 and 15.6 per cent in 2017. SMEs account for 99.8 per cent of these. Women are equal to men in entrepreneurial mindset, and in many cases are even more motivated to own businesses due to the independence entrepreneurship can provide.
Bridging the funding gap is critical to unleashing the full potential of women's entrepreneurship in all its diversity. Women have the capacity to add billions to the economy, to create quality jobs, and to innovate across industries.
AFIA helps funders to address the funding gap by providing an online tool to self-assess their policies and processes, a scorecard and guidance based on leading practices, and a comprehensive training program for team members.
One thing that makes AFIA training unique is how it highlights nine specific barriers to funding access for women with a DEI lens, and provides specific approaches and tools for funders to address these barriers. This training is for people in customer-facing roles, such as business advisers and loan officers, as well as the people behind the scenes who set policies or who are involved in decisions on funding.
Unequal funding access is disproportionately affecting racialized and immigrant small-business owners, limiting business growth and financial independence for thousands of entrepreneurs. We hope that AFIA can be part of bringing about positive changes to support these businesses.
Paulina Cameron is CEO of The Forum.