Figure 1: Disrupting a self-perpetuating cycle

It is well understood that women in general face greater barriers than men in small business and entrepreneurship. Access to capital, networks and relevant education and skills are the most oft-cited barriers. Women in NSW from backgrounds that further disadvantage them in access to capital, networks, and skills will experience even greater barriers to success in small business. Such women could include:

• Indigenous women;
• migrant or refugee women;
• women in rural, regional and remote areas;
• women from low-income households or backgrounds; and
• women living with a disability.

Women who experience forms of disadvantage or marginalisation in addition to that caused by gender (e.g., racial discrimination, living with a disability, or lower income) face even greater barriers to growing their business. [1] Research on female entrepreneurs confirms this, showing that the more “counterstereotypical” an entrepreneur is, the greater the risk perceived by potential funders. [2] The further an entrepreneur deviates from the stereotype of a white middle-class man as the model of success, the more they will be scrutinised and harshly evaluated, while having to do more to prove their legitimacy and potential. [3] Moreover, female entrepreneurs who operate in industries, sectors or communities that funders are personally unfamiliar with are also regarded as greater risks. [4] Reflecting the greater barriers faced by women experiencing multiple forms of disadvantage, African American and Hispanic women in the United States have been shown to receive disproportionately low amounts of funding for their businesses. [5] While many of these findings pertain to venture capital ecosystems seeking to back high-growth ventures, the underlying dynamics largely hold true, and in some respects may be worse, for small businesses seeking growth at a low to moderate level.

While we can assume a similar situation in Australia, there is more limited research and data on the extent to which Australian women from disadvantaged backgrounds face greater barriers to raising capital. Nonetheless, it is clear that particular groups are at a significant disadvantage in raising capital – for example:

• Indigenous-owned enterprises which applied for investment from the Indigenous Social Enterprise Fund run by Social Ventures Australia struggled to meet the requirements and parameters for commercial lending. [6]
• Migrant and refugee women often require specific supports in entrepreneurship for various reasons, including: [7]
  • language and/or cultural barriers;
  • lack of savings and other financial capital;
  • lack of credit and banking history in Australia;
  • lack of local business experience and/or knowledge;
  • needing to attend training during school hours when they are a primary caregiver;
  • some women feel more comfortable learning and working with other women;
  • some women have preconceptions about their capabilities and have a lack of self-confidence, especially if their partner is reluctant to have them work outside the home; and increased levels of discrimination.

The NSW Women’s Opportunity Fund (“the Fund”) would be a Government-owned (but independently managed) Fund which crowds in private capital to provide suitable financial products and holistic business support to women small business owners who belong to disadvantaged groups or communities. The Fund would constitute a form of “social impact investing” because it aims to achieve a social objective (i.e., more women from disadvantaged backgrounds being successful in business) alongside a financial return (i.e., the growth of those businesses and financial returns for the Fund). [12]

The purpose of the Fund would be to provide capital and enable access to a range of additional supports, such as networks and upskilling, to help disadvantaged women grow their businesses. The Fund can also help its recipients link into the wider innovation ecosystem to enable them to effectively innovate in their small businesses (for example, through web design, export strategy or digitising operations).

The Fund would specifically target cohorts of women whose background or characteristics mean that they are systematically disadvantaged in accessing capital from mainstream or conventional sources and the array of supports that enable entrepreneurialism. Examples of such cohorts could include women from refugee or migrant backgrounds and women living and working in regional, rural and remote areas of NSW. The support for disadvantaged women to grow their businesses would constitute the core social objective of the Fund.

 The Fund would integrate social and financial objectives, delivering long-term value for women small business owners as well as for the wider economy. By adopting a social impact investment framework – one which encompasses economic security and good jobs – the Fund would differentiate itself from other sources of finance available to women entrepreneurs. In particular, the Fund would have a willingness and capacity to take on certain levels and types of risk (for instance, when owners have few or no assets, or lack credit history), and to offer a degree of flexibility to its recipients, that reflects the lived realities of disadvantaged women in a range of circumstances. This kind of risk and flexibility would not typically be attractive to the commercial financial market. Moreover, beyond these financial considerations, there are often human and social barriers to accessing capital, with a lack of relatable and approachable financing options embedded in the disadvantaged communities where it is needed. Consequently, the Fund should be designed to facilitate ease of access end-to-end from initial application to the provision of ongoing support. The Fund’s operational effectiveness in connecting with, and relating to, women neglected by standard capital markets should be one of its distinguishing features.

The Fund could provide capital in different forms and combinations – concessional loans, equity investments, and grants – that would help women from disadvantaged backgrounds to grow their business. While public money would be needed to set up and anchor the Fund, there is significant potential to generate participation from private market entities. Mainstream financial market players, particularly banks, would have strong reasons to participate in the Fund: to build connections with potential future business clients, while also delivering on their corporate social responsibility objectives. The crowding in of private capital would amplify the Fund’s impact, enabling it to connect into mainstream capital markets in ways which could benefit the women involved and the wider NSW economy over time. Where there are organisations, such as not-for-profits (e.g., Thrive Refugee Enterprises, detailed further below), already providing similar financial products and services to disadvantaged women, the Fund could consider partnership arrangements with them. This could include directly funding a partner organisation to scale-up an existing program.

Enabling disadvantaged women to access capital will grow small businesses — building economic security and creating jobs

The Fund would aim to expand the ecosystem of successful and diverse businesses owned by women in NSW. Its focus is less on identifying innovative businesses with high growth potential, and more on supporting a large number of conventional small businesses owned by women to scale up and generate sustainable business growth. For example, the Fund could back a woman in a rural town with a small business to sell her products across NSW, or it could back a refugee woman in Western Sydney to digitise her accounting and hire an assistant so her translation business can take on more clients.

The Fund’s role is to address the gap in capital for disadvantaged women who own viable businesses with some growth potential, including low to moderate growth potential, and to positively shape market dynamics which could better meet their needs over time. Other sources of finance are not necessarily available to this cohort for various reasons (Figure 2): very limited personal savings; venture capital, because it is focused on innovation and high-growth sectors like technology; commercial loans, because they require a credit history and/or assets as collateral; and charitable donations and philanthropy are highly constrained and inconsistent in availability. The Fund would aim to address this financing gap by providing a greater choice and volume of finance.

The Fund would also be different from other finance sources in its willingness and capacity to take on risk, allowing it to offer flexibility to disadvantaged women that reflects their needs. For instance, disadvantaged women may not be able to grow their business in a linear way (e.g., due to caring commitments or other employment), or the capital provided by the Fund might be put to best use on non-direct business expenses (e.g., childcare that allows a woman to devote time to her business).

The Fund would aim to generate social and financial returns that not only help drive growth in NSW, but that also change the cultural misconceptions that contribute to the marginalisation of women from business (Figure 3). Globally, there is an estimated USD 1.7 trillion shortfall in access to finance for small businesses owned by women. [13] There is a significant opportunity for NSW to help women unlock their own potential, achieve economic security, and contribute to the dynamism and growth of the wider economy. The Fund could also positively contribute to the Government’s fiscal balance sheet, both through its direct financial returns and indirectly by helping generate a larger business tax revenue base.