Entrepreneurship Policies through a Gender Lens

Spain

By Maria Cristina Diaz Garcia, University of Castilla-La Mancha

Background

Historically, Spain has been characterised as having a smaller gender gap in entrepreneurial activity compared to most European Union Member States. In 2018, Spain ranked 25^th out of 54 countries in the ratio of female to male “Total early-stage Entrepreneurial Activity” (TEA) (Global Entrepreneurship Monitor, 2019).1 Women account for one-quarter (24.5%) of own-account workers (OECD, 2017).

The recent economic crisis in Spain has resulted in cuts to women-focused small business support programmes and a backsliding in progress towards gender equality. In 2018, The Global Gender Gap Report downgraded Spain from 11^th place in 2006 to 29 out of 148 countries. Women’s “economic participation and opportunity” ranked 80 out of 149 countries (World Economic Forum, 2018).

Consistent with other economies, a key barrier that entrepreneurs face is access to finance (OECD, 2017). Securing capital without guarantees remains problematic, particularly during start-up and among low-tech businesses. It is especially difficult for entrepreneurs who seek loans of between EUR 10 000 and EUR 50 000. Individuals who are most likely to experience this difficulty, yet have the capacity to manage the debt, are moderate income earners. To address these capital market gaps, microcredit programmes provide small amounts of capital to start or expand a microenterprise, contributing to wealth and job creation.

Spanish state-controlled agencies support a number of capital market interventions. The Institute of Official Credit (Instituto de Crédito Oficial, ICO) is a public bank that facilitates access to capital through intermediation of credit institutions. The Spanish Refinancing Company (Compañía Española de Reafianzamiento, CERSA) is a public refinancing company that shares the risk of small business loans (OECD, 2005). Founded in 1977 and under the Ministry of Science and Innovation, the Centre for the Development of Industrial Technology (Centro para el Desarrollo Tecnológico Industrial, CDTI) advances support to “increase the competitive edge of Spanish companies by raising their technological level” (CDTI, 2008). The National Innovation Company (Empresa Nacional de Innovación, ENISA) offers financial assistance to entrepreneurs who seek to expand their companies. Programmes are offered without consideration of gender in programme design. None of these programmes explicitly seek to foster women’s entrepreneurship.

Observing a market gap, in 2000, The Women’s Institute launched the Women's Entrepreneurship Support Programme (Programa de Apoyo Empresarial a las Mujeres, PAEM). The national programme is targeted at “entrepreneurs who want to start their business, and businesswomen with a business of less than five years old.” The programme is promoted by the Women's Institute and Spanish Chamber of Commerce, with co-financing from the European Social Fund. The programme supports advisory services through Chambers of Commerce, an online portal (www.e-empresarias.net), microcredit without guarantees, and follow-on services of six months (a longer period of support was provided previously, however, this was reduced due to programme funding cuts). A collaboration agreement between The Women’s Institute’s PAEM programme and Microbank provides “microcredits for businesses in agreement with banking entities” (banking entities previously referred to these products as “social microcredits” and differentiating them from “financial microcredits”). Credit worthiness is determined through business plans that are assessed by intermediaries authorised by Microbank-La Caixa and the Secretary of State for Social Services and Equality. Microbank represents a new model of sustainable “social banking.” The programme offers “social microcredits” targeted at the self-employed who have difficulty accessing traditional credit but retain enough human capital to create and manage a firm. The majority (78%) of social micro-credit beneficiaries are women (Cordobés, Iglesias and Sanz, 2010).

In 2019, PAEM provided funding support to 207 microcredit organisations (EUR 3.7 million) contributing to the creation of 2 200 women-owned businesses and 2 341 working places. Microbank-La Caixa offers micro-loans without collateral or a guarantee for a maximum of EUR 25 000. Funding covers up to 100% of the project at a fixed interest rate of 5.9%. Similar support services have been offered to firms with a shortage of cash due to the COVID-19 pandemic in which this rate is reduced to 3.9%. Repayment is up to 6 years with a 6-month grace period. Assessment incudes a business plan and an online questionnaire to determine trustworthiness of loan-takers.

In addition, since 2014 the Women’s Institute has supported a programme with CERSA to facilitate access to start-up finance, marketing/promotion, consolidation, growth and improvement of women entrepreneurs’ business projects which have initiated their activity within the last three years. The Institute credits the costs of assessing the business projects in return for an endorsement (around EUR 800) allowing women entrepreneurs to obtain funding from mutual guarantee companies throughout the national territory. In 2018, 212 transactions were closed totalling EUR 17.7 million (in 2017, there were 253 transactions amounting to EUR 15.4 million). From 2005 to 2007, one of these mutual guarantee companies, the Reciprocal Guarantee Society at the Autonomous Community of Madrid (AVALMADRID, SGR), supported a department to foster women’s entrepreneurship (De la Fuente et al., 2014).

Studies suggest that one factor restricting women’s entrepreneurship is perceived difficulties in accessing external funding due to issues such as lack of trust and lack of support for women entrepreneurs (Sena, Scott and Roper, 2012). It can be assumed that having a gender approach within funding programmes will help to foster women’s entrepreneurship. In this line of argument, De la Fuente et al. (2014) have reported that during the period in which AVALMADRID SGR had a Women's Department, there was an increase in the number of projects and the amount financed for women’s entrepreneurs. That is, specific or targeted women-focused support had a positive impact on increasing women's entrepreneurship.

In sum, with the exception of two women-focused business support policies, a gender perspective is absent. For example, in 2013 the Law of Entrepreneurs and their Internationalisation was enacted with the mandate to support entrepreneurs and entrepreneurship, favouring development, growth and internationalisation. However, the gender perspective was neglected, and consequently, the opportunity to offer targeted support to women's entrepreneurship was lost (Ruiz Garijo, 2015).

Policy issue: Access to finance

There is room for improvement in policies to support entrepreneurship. The most urgent need is to increase access to financing. There are several institutions that advance funding and provide loan guarantee schemes to small businesses (ICO, CERSA, CDTI, ENISA). Others agencies, such as INJUVE and the Women’s Institute, provide support for entrepreneurs as a complementary goal. This multi-institutional approach results in limited coordination in the implementation of policies to support women entrepreneurs. Within mainstream programmes there are no specific departments or strategic goals related to gender equality. This negates women entrepreneurs’ needs.

Accordingly, Ortega (2012) states that actions of public administration in Spain are hampered by the lack of strategic and transversal approaches, limited co-ordination among agents associated with programme implementation, neglect of individual barriers to business start-up, and ineffective institutional changes. In 2018, Spain lagged behind other governments’ entrepreneurship policies regarding “support and relevance” and “taxes and bureacracy” (39^th and 46^th of 54 countries surveyed) (GEM, 2019). With respect to inclusive entrepreneurship policies, the OECD reports (2018):

“Overall, despite advances in entrepreneurship policies, the inclusive entrepreneurship institutional support framework has been largely developed on an ad hoc basis. The main objectives of most of the institutions are not directly related to entrepreneurship, which is only incorporated as a complementary goal. This is the case, for instance, of the Young Persons’ Institute (Instituto de la Juventud, INJUVE) and the Women Institute. Similarly, the public financial institution ICO has several funding programmes, and only one of them (the ICO SMEs and Entrepreneurs Facility) is focused on entrepreneurs. Monitoring and evaluation of initiatives is still scarce and partial.”

Analysing results of microcredit programmes, there are more hurdles for women-owned firms than men-owned firms, in part due to differences in owner and firm profiles. Women-owned firms are, on average, more likely to operate in the services sectors and trades, and are smaller in size than firms owned by men. Compared to men microcredit recipients, women recipients are more likely to be unemployed (23% vs. 35%) and less likely to have been previously self-employed (51% vs. 33%) (Microbank, 2014). A positive outcome of microcredits for recipients is increased entrepreneurial self-efficacy and independence, which is higher for women compared to men (73% and 65%) (Microbank, 2014). Approximately half of microcredit recipients perceived that their firm’s operation was going “well” or “very well”, being higher among men than women (59% vs. 53%). Women recipients were more likely to perceive that microcredit was crucial to creating their firms compared to men (66% vs. 53%), however, women reported more difficulties in reaching financial month ends (Microbank, 2014). Even though 62% of women entrepreneurs report that their businesses generated enough revenue to repay the loan from the beginning, one fifth (20%) stated that their business did not generate enough revenue or liquidity to pay the loan fees (Microbank, 2014).

Almost half (49%) of all entrepreneurs operating a business perceived their current economic situation was worse than if they had not been granted microcredit, with no significant gender differences; a percentage that increases to 72% among those who had to close their businesses (Microbank, 2014). Firm survival rate among women-owned small businesses is lower than for that of men-owned firms (76% vs. 82%, respectively) (Microbank, 2014). The majority of Microbank’s microcredit beneficiaries closed their businesses within the first two years of operation (57%), a period in which micro-enterprises are typically most vulnerable to closure (Cordobés et al., 2010). These gender differences in business performance and owners’ perceptions suggest the need to make the terms of lending (such as, the grace period) more flexible for women, with provisions of follow-on advisory services for more than six months (terms offered by the PAEM’s programme) in order that lenders can repay the loan while business remain in operation.

Conclusions and recommendations

Women entrepreneurs are taking on greater risks and commercial responsibilities, while increasing their economic empowerment and financial autonomy. To achieve equitable participation in entrepreneurship, there remains the need to introduce policies with positive social and economic outcome measures, to add “gender dimensions” to financing policies, and to recognise differentiated needs among entrepreneurs. That is, there is a need to contextualise the experiences of women entrepreneurs to create appropriate lending programmes.

An illustrative regional programme that includes a “gender dimension” is the Programme “Financia Adelante” (“Go Ahead Funding”), which is managed by the Finance Institute of Castilla La Mancha (IFCLM). The programme provides subsidised lending to incorporated or unincorporated entities in order to encourage start-up or the consolidation of activities. The programme reflects positive discrimination for projects promoted by priority groups, including women, youth, people over 55 years old, long-term unemployed, people with disabilities, and depopulated regions. It considers intersectionality, such as disabled women in a rural priority area. In the case of collective projects, the company is assessed as a priority when at least 50% of capital is owned by applicants who meet the priority group criteria. The projects presented by micro-SMEs are also given priority (e.g. firms with fewer than 10 employees and less than EUR 2 million on the balance sheet). Different funding instruments are complemented with the provision of one year of business consultancy and terms (i.e. interest rates) that are much better than those offered by Microbank-PAEM.

Recommendations for Spain

• Create finance policies with a gender dimension, being conscious of the discrete needs of women entrepreneurs. Examples include financial products with more flexible loan conditions and advisory services involving longer periods of advisory support.

• Consider, as a priority, support for women entrepreneurs with high-growth potential firms in technology sectors.

• Foster closer collaboration among financial institutions and small business intermediaries to improve the scope of these initiatives targeted at women-owned firms.

• Create a “women’s entrepreneurship approach” within financial lending institutions. This should include requiring banks to account for their performance with respect to gender equality, demonstrating equitable treatment of applications and risk evaluations. The approach should support actions that enhance women's confidence in obtaining financing, and that reduce negative perceptions about accessing capital (i.e. create a specific department for analysing women’s applications for funds).

• Provide free consultancy to women beneficiaries of microcredits in the first one or two years of business to increase the probability that these entrepreneurs are able to sustain their business and repay the microcredit.

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