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Challenging panorama of female entrepreneurs in Latin America

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Women's businesses have the same survival rate as men's, despite the exhaustive search for funding to create them

Challenging panorama of female entrepreneurs in Latin America

A few weeks ago, JP Morgan Chase Institute published a study that showed that companies founded by women start with less income due to the complicated access to financing. However, they also state that, despite this inequitable start, the survival of companies founded by women have the same survival as those founded by men.

Leer en español: El panorama desafiante de las emprendedoras en América Latina

The report, titled 'Gender, Age, and Small Business Financial Outcomes', talks about the financial performance of small businesses and highlights the difference in business success based on age and gender.

According to their figures, women founded between 29% and 32% of the new companies in the United States per year between 2013 and 2017. These companies started with an income of 34% lower than that of men and, in Chicago, for example, women received first incomes of $ 48,000 compared to $ 78,000 for men.

Microenterprises: greater female participation, lower investment

As in the rest of the world, one of the main problems that women face in the creation of their companies is the lack of access to credit, financing, advice and business networks. Throughout the continent, women get their initial capital through loans from their families, friends and even their personal savings.

According to an academic article published by the Revista Universitaria RUTA  Chile, most of the companies run by women in Latin America are in the service sector and are smaller and less developed. These are considered as micro-enterprises within the MSMEs of the region, which, in general, have low survival rates: they are too small and operate with little capital.

In fact, according to figures from Info7 from Mexico, 60% of small and medium-sized companies in the country are led by a woman and, of these companies, 70% are in the service, commerce and tourism sector

Also read: How many women hold important positions in Latin American companies?

Companies that start with high levels of capital show significantly better performance. Since those founded by women start with little capital, they are showing a low performance in assets, income, profitability, and survival. In addition to this, they tend to have a less diversified business than male entrepreneurs, limiting themselves to greater possibilities.

Microenterprises have low survival rates

According to the Rankia portal, 65% of the micro and small companies in Mexico die before reaching the age of 5 and, on average, their life expectancy is only about eight years.

They also show that between 70% and 80% of companies in micro and small companies in Latin America go bankrupt before the first year and, of those that remain, 70% reach five years.

The portal Expansión explained that three out of every 10 companies registered with the SAT in Mexico belong to women. On this, the vice president of Equity and Gender of the Council of Chambers and Business Associations of the State of Mexico (CONCAEM) affirmed that nine out of ten companies of women are MSMEs. According to Inegi statistics, these MSMEs for women have a life expectancy of no more than eight years.

In Colombia, the newspaper El Tiempo said that survival is 34% in the first 5 years of activity. That is to say, out of every 100 formally created firms, 34 survive. They also affirmed that the chances of survival increase with the size of the firm upon entering the market, so micro-enterprises must deal with greater challenges.

The study published by the magazine RUTA mentioned above found no evidence that companies managed by women had fewer years than those of men.

However, it is clear that, having few resources to start their ventures, women end up developing micro and small businesses, and these have a lower survival rate than the others. In the study, they also found that the monetary sales of companies led by men are greater than those led by women.

Despite this, several Latin American countries have developed initiatives and institutions to guarantee women better opportunities from the beginning. These offer better and easier access to credit, business consulting, among others.

 

LatinAmerican Post | Valentina Moya

Translated from "El panorama de las emprendedoras en América Latina"

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