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Closing the funding gap for women entrepreneurs

Research from the Global Entrepreneurship Monitor (GEM) found that women are 20 percent less likely than men to believe they possess the skills to start a business, even when they have comparable qualifications.

Lenita Tobing and Samira Shihab (The Jakarta Post)
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Thu, January 16, 2025

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Closing the funding gap for women entrepreneurs Hands on: A crafter makes resin-based accessories for smartphones at Kanamizu Craft workshop in Malang, East Java, on Tuesday. The workshop can produce a minimum of 15 accessories, ranging from phone cases to coasters and wall decorations, in a month, and are sold for between Rp 75,000 (US$4.60) and Rp 150,000 apiece. (Antara/Ari Bowo Sucipto)

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nder the leadership of President Prabowo Subianto, Indonesia is targeting GDP growth of 8 percent by 2029 and all our key decision makers are pushing to unlock additional growth pockets. Can women entrepreneurs play a role in unlocking our GDP growth, especially given that studies show that women-led businesses could increase global annual GDP by up to 26 percent?

The answer is “yes”, nonetheless Indonesian women entrepreneurs are struggling. Despite the countless initiatives to empower female entrepreneurs, the stark reality remains, women-led businesses are underfunded. This funding gap highlights the ongoing challenges women encounter in securing essential funding and resources to build their businesses and remain competitive in the entrepreneurial landscape.

Underfunded women-led ventures not only hinder their growth but also deny investors the chance to benefit from their demonstrated success. It is a proven fact that businesses led by women consistently outperform their male-led counterparts. Yet, in 2023, female-founded businesses received a mere 2.8 percent of total venture capital funding compared with their male counterparts. This disparity persists despite women-led companies delivering an impressive 78 cents in profit for every dollar invested, more than double the 31 cents generated by male-led businesses.

The white paper “Closing the Funding Gap for Women Entrepreneurs in Indonesia”, a collaboration between Boston Consulting Group (BCG) and Stellar Women, sheds light on the key challenges holding back women entrepreneurs in Indonesia from reaching their full potential.

What is standing in the way of women entrepreneurs?

First is the disconnect between women entrepreneurs’ business models and investor expectations. In Indonesia, women-led businesses often prioritize sustaining livelihoods over aggressive growth and expansion, which diverges from investors’ preference for high-growth ventures with substantial returns. This challenge is compounded by patriarchal norms and domestic responsibilities, creating a “double burden” that discourages many women entrepreneurs from taking the risks necessary to scale their businesses.

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Exacerbating that condition, based on surveys done by BCG and Stellar Women, is that while over 90 percent of women entrepreneurs are familiar with self-financing, only 67 percent are aware of external funding sources, highlighting a critical gap in awareness.

Research from the Global Entrepreneurship Monitor (GEM) found that women are 20 percent less likely than men to believe they possess the skills to start a business, even when they have comparable qualifications. This confidence gap often leads to underselling their vision, creating a major barrier as confident delivery is frequently linked to perceived competence.

When they do get to the pitches, many struggle to deliver compelling pitches due to limited resources and mentorship. This further fuels investor biases, which shape how pitches are evaluated. Women entrepreneurs often present their stories through data-driven metrics and a cautious approach, while men tend to focus on bold, big-picture narratives that appeal to venture capitalists.

As a result, male entrepreneurs are frequently asked “promotion” questions centered on growth potential, whereas women are more often asked “prevention” questions about risks. This difference in questioning shapes funding outcomes, as growth-focused pitches typically secure significantly more capital.

In addition, women entrepreneurs might sometimes get left behind as they usually have more limited access to networking opportunities. Networking events are often male dominated with many deals unfolding in informal settings, where women may not feel as comfortable participating or sometimes even excluded.

Leveling the playing field for women entrepreneurs

With over 60 million micro, small and medium enterprises (MSMEs) in Indonesia, these businesses are the backbone of the local economy. Yet, 46.2 percent of women entrepreneurs face significant challenges in securing funding, often due to limited access to mentorship, investor networks and financing information. To unlock the full economic potential of women-led MSMEs, it is crucial to implement targeted, actionable solutions that bridge the funding gaps hindering their growth.

To truly level the playing field, a concerted public-private partnership approach blending top-down initiatives from the government and bottom-up contributions from the broader ecosystem is essential.

Central to this effort should be a champion actor within the government, potentially through collaboration among the Women’s Empowerment Ministry, the MSMEs Ministry and the Finance Ministry, ensuring alignment and resource allocation.

There are already numerous positive programs and initiatives driven these key stakeholders, nonetheless, there need to be more structured collaboration, target or key performance indicator (KPI) alignment and impact measurement. For example, establishing specific KPIs to measure and track progress, such as the percentage growth in women-led businesses or improvements in funding access, that are committed in the respective ministries’ annual plans is vital for accountability and sustained impact. To further address funding barriers, the government could implement gender-focused programs such as national grants targeting high-potential female entrepreneurs. These measures would not only empower women but also unlock untapped economic potential across the country.

In addition, both government and relevant private stakeholders can join forces to break down the barriers for women entrepreneurs. Reflecting on the challenges mentioned above, programs focused on improving skillsets, broadening women entrepreneurs’ networks and increasing access to and knowledge of funding options are necessary.

Women entrepreneurs have a strong willingness to learn and must be equipped with the right tools to sell their business ideas and products to foreign markets or multinational corporations, creating opportunities for them to seed and scale their businesses. By giving them a platform that grants access to essential start-up information that connects aspiring entrepreneurs with successful role models, mentors and potential investors, we can lay the foundation for a thriving start-up ecosystem, nurturing it from the ground up.

Beyond formal training, women entrepreneurs must take a proactive approach by engaging in webinars, networking events and accelerator programs. These platforms not only keep them informed about industry trends and emerging technologies but also foster a mindset of continuous growth. By strategically investing in their skillsets and embracing innovation, female founders can position themselves as forward-thinking leaders, equipped to scale their businesses successfully, an approach crucial to attracting investors and driving long-term growth.

Despite the progress made, there is still a critical need to raise awareness among female entrepreneurs about the diverse funding options available to them, such as debt financing, crowdfunding, angel investors and grants. Each of these avenues offers unique advantages tailored to different stages of business growth, and it is essential that women entrepreneurs are equipped with the knowledge to make informed, strategic decisions when securing funding. Moreover, financial institutions can play a significant role by not only raising awareness and educating, but also accelerating access and setting corporate targets on financing for women entrepreneurs.

By tapping into a comprehensive option of funding channels, women entrepreneurs can access customized financial solutions that fuel both immediate growth and long-term success. Expanding access to these opportunities is not only key to bridging the funding gap but also pivotal in empowering women to break through barriers and lead with innovation in the business world.

It is time to invest in Indonesia’s women entrepreneurs

To summarize, investing in women entrepreneurs has become an economic imperative. Studies show it has globally increased annual GDP by up to 26 percent, adding US$160 trillion to human capital wealth, so Indonesian stakeholders, and all of us, must invest to unlock the contribution of our women entrepreneurs and the time is now.

Beyond economic growth, investing in women entrepreneurs has a significant social impact and push for gender equity, it is a strategic move for investors to not only gain financial returns, but also build stronger, more resilient communities. Women entrepreneurs tend to reinvest as much as 90 percent of their income back into their families and communities, driving progress in education, health care and essential services. This reinvestment sparks a multiplier effect, fostering social cohesion and reducing poverty.

Investing in women entrepreneurs is not just a moral imperative; it is a strategic move that empowers women, drives innovation and builds a more sustainable future for all, and these are critical drivers to GDP growth, which will contribute to Indonesia’s 8 percent target by 2029.

-- Lenita Tobing is managing director and partner at Boston Consulting Group, while Samira Shihab is founder of Stellar Women and principal of AC Ventures.

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