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Global Entrepreneurs Need New Funding Models

Author: Gayle Tzemach Lemmon, Senior Fellow for Women and Foreign Policy
April 4, 2012
Harvard Business Review

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Entrepreneurship seems to have become the silver bullet for a job-scarce, unemployment-saddled global economy still struggling to shake off recession. Around the world, leaders talk about how start-ups can create new jobs and lift regions out of poverty. But many entrepreneurs—particularly those in the world's toughest economies—are still battling to secure the cash they need to launch and run their businesses.

In low-income countries, according to World Bank data in a recent paper by the consultancy Dalberg, 43% of businesses with between 20 and 99 employees say that access to finance is a major constraint. The White House has called this gap between the demand and supply of finance for small and medium enterprises a "market failure...[and] a serious constraint on efforts to promote strong and sustainable global recovery."

This finance crunch means that many businesses can't access the capital critical to expanding and creating the jobs that policymakers so desperately seek. This is particularly true for women entrepreneurs, who rarely hold land in their own names and often have a shorter history in business than men, both of which make them even greater risks in the eyes of most banks, despite the fact that there is no notable gap between men's and women's productivity when all other factors are equal. This funding deficit results in lost productivity and potential as businesses that have the customers to grow find they have few dollars to invest in the equipment or the talent that expansion requires.

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