Women-Owned Firms in Europe and Central Asia Face Persistent Credit Barriers

A new World Bank report says women-led businesses in Europe and Central Asia face a USD 50 billion financing gap due to barriers such as lack of collateral, restrictive banking practices, investor bias, and weak legal support. The study argues that expanding women’s access to credit and investment could significantly boost economic growth, innovation, and job creation across the region.

Women-led businesses across Europe and Central Asia are struggling to access the funding they need to grow, according to a major new World Bank report titled The Missing Half of Capital: Unlocking Finance for Women-Led Firms in Europe and Central Asia. Prepared by researchers from the World Bank's Fiscal Policy and Growth Global Department and Financial Services Sector Global Department, the study warns that the region is losing out on economic growth by failing to support women entrepreneurs properly.

The report estimates that women-owned and women-led small and medium-sized enterprises (WSMEs) in the region faced a financing gap of around USD 50 billion in 2019. Across emerging markets globally, the gap stood at nearly USD 1.9 trillion. Researchers say women entrepreneurs are less likely to apply for loans, less likely to receive them, and more likely to face difficult borrowing conditions compared to male-led firms.

Barriers Begin Before Women Apply for Loans

The study shows that many women entrepreneurs face obstacles long before banks even review their applications. Fear of rejection, low confidence, lack of information, and distrust in financial institutions discourage many women from seeking formal finance.

In countries such as Bosnia and Herzegovina, women business owners reported that high fees, complicated paperwork, and difficult banking procedures pushed them away from formal financial services. Cultural attitudes and social norms also play a major role. In several countries across Europe and Central Asia, women were found to avoid applying for loans because they expected discrimination or believed they would not be approved.

Collateral is another major issue. Banks often require land or property as security for loans, but women are less likely to own high-value assets. Even when they do own property, its value is often lower than the assets owned by men. This leaves many women entrepreneurs unable to qualify for loans or forced to accept smaller loans at higher interest rates.

Banks and Investors Are Part of the Problem

The report argues that financial institutions themselves contribute to the financing gap. Many banking products are designed for larger, asset-heavy businesses rather than the smaller service-sector firms where women entrepreneurs are more active.

Research from Kyrgyzstan found that women business owners wanted more flexible repayment schedules, lower collateral requirements, and installment-based financing, but traditional loan products rarely offered such options.

The study also found evidence of bias among loan officers and investors. Experimental research from Türkiye showed that some loan officers gave women-led firms smaller loans and imposed stricter conditions even when the businesses were financially similar to male-led firms.

In venture capital and equity markets, the situation is even worse. Women entrepreneurs remain underrepresented in technology and high-growth sectors favored by investors. Studies reviewed in the report found that investors often judge women entrepreneurs more harshly during fundraising pitches and are more likely to focus on risks rather than growth opportunities.

New Financial Innovations Are Showing Results

Despite these challenges, the report highlights several financial innovations that are helping women entrepreneurs gain better access to finance.

One successful approach allows purchased business assets, such as equipment or vehicles, to serve as collateral instead of land or property. Other programs use psychometric credit scoring systems that assess borrowers based on behavior, skills, and business potential rather than traditional collateral requirements.

Experiments in countries including Ethiopia, Kenya, Pakistan, and Egypt showed that flexible loan products, larger credit limits, installment-based repayments, and performance-linked financing increased borrowing among women entrepreneurs without increasing default rates.

Some banks are also changing internal systems to reduce bias. Studies found that adjusting loan officers' incentives and providing feedback on unconscious bias helped reduce gender gaps in lending decisions.

Closing the Gap Could Boost Economic Growth

The World Bank report stresses that improving access to finance for women entrepreneurs is not just about equality. It is also about economic growth, productivity, and job creation.

Researchers argue that women-led businesses have strong potential to expand, innovate, and create employment if they receive fair access to credit and investment. However, many governments in Europe and Central Asia still lack clear policies to support women entrepreneurs, while several countries do not even collect enough gender-based financial data to properly measure the problem.

The report concludes that closing the financing gap will require better financial products, stronger legal protections, more flexible lending systems, improved investor practices, and better data collection. Without these reforms, the region risks leaving a major source of economic growth untapped.