Women Business Owners in France: The Issue of Financing Discrimination.

Over the last twenty years, academics and economic organizations have demonstrated a growing interest in women entrepreneurs, especially in the United States and Canada where the number of women-owned businesses has been rising. Female entrepreneurship is now considered one of the sources of

growth, employment, and innovation. However, very little is known about women entrepreneurs in France, except for basic national statistics, especially at the start-up stage (INSEE 1998; ANCE [1]). In 1998, France had 1,400,000 firms, of which 30 percent (320,000) were owned and managed by women. Among these 320,000 women-owned firms, 55 percent had no employees, 38 percent had from one to nine employees, and 7 percent had 10 employees or more. Taken as a whole, female-owned firms are smaller than those owned by men. As in all other developed countries, these firms operate mostly in retail trade and services (INSEE 1998).

One of the most interesting issues about female entrepreneurship is the way women entrepreneurs forge their own paths in the male-dominated sphere of business and finance. Women in business often claim they are discriminated against in both overt and subtle ways. Previous quantitative studies exploring this discrimination have been rather inconclusive, especially about access to financing--one of the main issues pointed to when discrimination is suggested. Thus, the question remains to be answered, as some still insist discrimination occurs. For example, Hisrich (1985) asserts that, "While financing is a problem for every entrepreneur, for women entrepreneurs the problem is often more acute" (p. 73). The aim of this article is to provide further insight into the issue of financing for female-owned businesses in France, considering both sides of the coin: the financial institutions and the women entrepreneurs. The analysis is based on a combination of previous studies, a questionnaire, and some interviews wit h French women entrepreneurs.

Historically in France, the popular expression "women hold the purse strings" held true as long as only small amounts of money were involved. If there was little money, women were in charge of it; if there was a lot of money, providing access to power and prestige, women were not permitted to manage it. For example, until 1965, a married woman could not open a credit account without her husband's consent (Veil 1994). Considering such a "coercive" past, it is interesting to look at the way French women entrepreneurs currently manage financing within their firms.

Methodology

A general survey with 240 items constitutes the core of this study. Two sets of data were used: data on male-owned businesses dating from 1994 and data for female-owned businesses from 1997. [2] The sample was chosen randomly from national statistics provided by INSEE and resulted in responses from 562 male entrepreneurs and 403 female entrepreneurs. The response rates for this mailed questionnaire were thirteen percent and eight percent respectively, which appears low but fairly represents the initial mailing samples. Due to the small size of the typical female-owned firm, the 1997 questionnaire included firms with 1-499 employees (85 percent had only one to nine employees), while the size of the male-owned firms ranged from 10-499 employees. For accurate comparisons with the male group, data on female-run firms of 10-499 employees were collected and analyzed separately.

In addition to the surveys, thirty interviews were conducted with women entrepreneurs from three geographical areas of France (Brittany, Paris, and Lyon), with businesses in industry, construction, transportation, sales, and retail trade. In terms of the origin of the business, 65 percent of the female entrepreneurs either created or took over an existing business, while the remaining 35 percent had inherited the business from a member of their family.

Results

Motivations. Table 1 presents the findings on the motivations that drive the respondents in their business. As found in previous research into the motivations of women entrepreneurs, this study found that their motivations were similar to those of men--independence and self-accomplishment were ranked first and second by both groups of women and by the men. However, in terms of the means rather than the rankings, the data indicate that the women placed less value on prestige attributes such as social status and power than did the men. In fact, the female-run firms with 10-499 employees ranked participating in economic development higher than revenue and had the highest mean of all three groups for providing jobs. As indicated by Brush (1992), women entrepreneurs "conceive of their business as a cooperative network of relationships rather than primarily as a separate profit-making entity" (p.17), and success for them means finding harmony within their relationships with others, with the survival of their busine ss being a necessary but not a sufficient condition.

Business Competence. Historically, the average female business owner has a liberal arts education. However, in recent times, more women entrepreneurs have business degrees, or even a technical background. Whereas the "old" generation of women entrepreneurs may have lacked business education, and particularly financial management skills, younger female entrepreneurs can be expected to have greater financial experience, due to the professional education and continuous training offered to new entrepreneurs. However, both the male and female entrepreneurs in our sample ranked financial competencies as their poorest business competencies (see Table 2). The women entrepreneurs in firms with 1-499 employees even indicated a negative appraisal of their financial abilities. This finding supports Mahot's comment that "despite their level of education being equivalent or even higher than men, in most of the EU countries, women more often face a lack of financial and management competencies" (1997, p.4).

This result may be explained by the fact that more than education, entrepreneurs usually point to work experience as the main source of their competence, and the average woman entrepreneur "lacks experience in executive management ... and a financial track record in business" (Hisrich, 1985, p.73). Furthermore, women tend to set up their business in an activity which was either a hobby or by chance and less often than men in a field in which they had professional experience. According to the Agence Nationale pour la Creation d'Entreprise, 71 percent of men base their business on professional experience compared to 55 percent of women (ANCE 1996). Finally as their former experience was often related to administrative duties or sales, women do not know about, or have access to, decision networks, particularly informal financing opportunities (Olm, Carlsrud, and Alvey 1988).

Financial Patterns. One of the initial steps when setting up a business is to obtain some initial funding. Previous studies have reported that initial capital in women's businesses was smaller than in men's. A 1996 French study of the start-up stage of firms showed that in 60 percent of cases, the women entrepreneurs' initial funds were under 50,000 FF (about US$8,000) compared to 53 percent for the male start-ups (Letowski 1996). Reasons for this situation combine and interact: women generally possess fewer personal funds due to their previous experience of being either in less qualified positions than men and/or earning less; women tend to go into retail trade or services which are less capital-demanding than manufacturing or transport; they prefer to rely mostly on personal or relatives' savings rather than going into debt--risk-aversion is stronger in women than in men (Sexton and Bowman 1990); and some of the lower financial competencies may play a role, together with the alleged discrimination on the p art of banks and other financing organizations.

Overall, the average sales of French women-owned businesses is lower than those for males. This is due to the small size (from zero to nine salaried people) of about 90 percent of the female-owned firms. If the comparison is made of firms of comparable size and field of activity, firms owned by women and men tend to perform equally. The surveys carried out with French businesses showed no difference between female-run and male-run small businesses (10--49 employees, according to the official French definition) in terms of the level of sales--for both, the median sales was 11 million FF. However, overall firm survival rates seem slightly lower for women than for men (European Network for SME Research 1996). The EU reports that the survival rate for French firms after five years of activity was 60 percent for the men-owned firms and 54 percent for women-owned firms. The EU points out that this is probably not gender-related but rather activity-related. Differences disappear when age, former experience, and fiel d of business are the same.

When entrepreneurs consider expanding, some methods are preferred over others. We can broadly distinguish the "high-development" profile (openness to funding from external partners, banks, and acquisition of other firms) from the "low-development" profile (preference for internal development, relying on one's own resources and profits of the firm). The majority of the small-business owners in our study both men and women, represent a low-development profile. However, women were less oriented towards growth than the men: 13 percent did not wish to develop their business at all, whereas only 6 percent of the men expressed the same attitude. The women who want to develop their business wish to do so mainly without external partnerships, funds, or acquisitions. Both men and women in the sample presented similar attitudes towards the control gained by holding a majority share of the capital--only one third were ready to lose this controlling interest in the event of the development of the firm. Table 3 presents ou r finding on the preferred methods of firm expansion.

Gender Bias in Financing. When dealing with the question of obtaining funds, it must be noted that the lending decision is based on the lender's assessment of both the project and the person running the project. In discussing discrimination, it is said that the gender of the entrepreneur is part of the decision-making process and puts the female applicants at a disadvantage. Despite several years of research into women entrepreneurs, the question of discrimination in access to finance remains unresolved. Objective quantitative data tend to demonstrate that no obvious discrimination exists, whereas discrimination is still suggested by more subjective evidence obtained in interviews. A 1994 French survey of business founders, of which 30 percent were women, showed that there was little gender-based difference in using bank credit for start-up costs--23 percent of the women and 22 percent of the men in the sample started with some bank loans (ANCE 1996). Riding and Swift (1990) showed that "the only apparent sex -based difference was that women were given higher collateral requirements for lines of credit" (cited in Fischer, Reuber, and Dyke 1993, p.156). Marlow's (1997) U.K. study reported that 43 percent of female and only 32 percent of male firm owners felt discrimination pressures in obtaining bank loans.

Gender bias is not the only explanation for women having more trouble than men obtaining financing. Women entrepreneurs usually initiate small business projects, in accordance with their personal qualifications, interests, and personal savings. These businesses do not often show real growth perspectives. Buttner and Rosen's (1992) study showed that no matter what the gender of the entrepreneur, bankers are reluctant to offer credit lines for such projects because they can expect a low return combined with high risk. Furthermore, entrepreneurs of such businesses may themselves be reluctant to borrow small amounts of money, as the interest rate would be substantially higher than for bigger projects. It is also frequently stated that entrepreneurs underestimate their financial needs at start-up. Classic systems of finance may not be suitable for small projects, not even informal "business angels" (who prefer high-growth firms operating in an innovative field). However, there are "alternative" sources of financin g that can enable entrepreneurs to obtain personal loans in a non-traditional way. In France, the CLEFE [3] are local savings clubs for women entrepreneurs that follow the African system of "tontines"--groups of women who pool their savings quite informally to allow one of them to start a business. The FGIF [4] in France also provides financial advice in the start-up phase and can offer some guarantee for raising lines of credit. The interest of the FGIF lies in the "gearing" effect it provides, but it remains underused because of its complexity and a general reluctance by bankers to take it into account.

Lending institutions pay much attention to the entrepreneur's abilities, as (s)he is the core of the project. Women entrepreneurs may be more apt to attribute problems to discrimination than do men. In their study, Buttner and Rosen (1992) report that men are more inclined to attribute a bank's refusal to weaknesses in the business plan or the economic climate, whereas women may attribute refusal to gender bias. Many involved in business financing deny the existence of gender bias, stating that they are looking for an "entrepreneur profile." One possible problem is that many female applicants may not fit the "stereotype" entrepreneur profile: assertive, competitive, self-confident, experienced. Due to some real or perceived lack of financial competencies (Table 2), women may have more difficulty in developing a medium-term business plan. Furthermore, French women are reported to feel insecure in financial negotiations, for instance in negotiating their own salary (de Menton 1994).

Given these apparent drawbacks with respect to finance, women need to look more outside of their own personal sphere when it comes to business. A study by Hisrich (1985) showed that the first source of advice for male entrepreneurs was professional experts (accountants, lawyers) and the second was their spouses, whereas the first source of advice for female entrepreneurs was their spouse, second was their friends, and third was professional advisors.

What did we learn from the interviews? None of the women interviewed felt that she suffered from overt sexual discrimination in accessing finance; when they encountered resistance from bankers or lending institutions, they attributed it to their young age at the time of application (less than 30-35 years old). Nevertheless, some of them claimed to have encountered slightly "sexist" bankers, though this did not seem to interfere with the final outcome. We can relate the "sexist" attitude to the constant need for women to demonstrate their ability as an entrepreneur. In a male-dominated environment, first reactions to women in business tend to involve skepticism and/or curiosity. As Hertz (1986) points out, "Although concrete evidence of discrimination (by banks) may be lacking, there exists sufficient circumstantial evidence to make one doubt their fair treatment of business women. When a bank manager dares to suggest to someone who heads a $80 million business that she should consult her husband who has no e quity in the business, it is difficult to believe that he applies the same criteria to her loan application as he would to a man's" (p.190). We suggest that, with a higher number of women in business, together with a better visibility offered by the media, a favorable evolution is on the way Another key point is that bankers are mostly men; this can lead to cultural bias, even if unintentional. Recurrent conflicts between bank managers and business women "reflect men's inability to split the feminine image into two: a woman and a person. The business women wanted to be treated just like any other person, but for most bank managers any other person' means a man" (Hertz 1986, p.191).

Conclusion

One conclusion from previous studies is that there is a general reluctance on the part of banks to negotiate small loans (Ducheneaut 1997; Buttner and Rosen 1992). Women begin and run small businesses, as do most men in business, and thus are not the main center of interest for bankers. Other, more informal, sources of financing need to be used and developed. Regarding access to financing, the only overt discrimination found against women was a higher demand for collateral requirements. Most of the discrimination was the result of problems with interpersonal communication between the persons in the finance field and the women entrepreneurs. When a gender bias is perceived, it may come mainly from skepticism shown by the lending institutions. There are two main sources of the communication problems: one relates to intercultural bias, as bankers (mostly men) tend to consider female entrepreneurs as women first rather than as persons; the other one is the apparent lack of financial competencies in women entrepr eneurs.

One short-term solution is to provide training for women who are starting or running a business. This is a remedy often proposed by researchers and economic support organizations. France already has some specific training programs and sources of funds for women entrepreneurs, including FGIF, CLEFE, and the "Boutiques de Gestion" network, which devotes five of its public agencies to women. Although their impact is still limited, the benefits of these programs derive mainly from the fact that women feel more comfortable discussing problems with other women. It is worth noting that the women-oriented programs are sometimes perceived as "positive action" or "reverse discrimination," and are thus not always well understood, even by women entrepreneurs. Finally it should be noted that one long-term improvement has already begun with the presence of more women in financial institutions dealing with business loans and financial management.

Muriel Orhan

Southern Cross University

Lismore, Australia

(1.) INSEE: Institut National de la Statistique et des Etudes Economiques; ANCE: Agence Nationale pour la Creation d'Entreprise.

(2.) We consider that the gap between the two periods is narrow enough to not interfere with the results.

(3.) CLEFE: Clubs Locaux d'Epargne pour les Femmes qui Entreprennent.

(4.) FGIF: Fonds de Garantie a l'Initiative des Femmes.

References

ANCE--Agence Nationale pour la Creation d'Entreprise (1996). "La place des femmes dans la creation et leurs specificites comparees aux hommes," Direction de l'Observatoire, May, NA049, Paris: ANCE.

Brush, Candida G. (1992). "Research on Women Business Owners: Past Trends, a New Perspective and Future Directions," Entrepreneurship Theory and Practice Summer, 5-30.

Buttner, Holly E., and Benson Rosen (1992). "Perception in the Loan Application Process: Male and Female Entrepreneurs, Perceptions and Subsequent Intentions," Journal of Small Business Management January, 58-65.

Ducheneaut, Bertrand (1997). "Women Entrepreneurs in SMEs," report prepared for the OECD Conference on Women Entrepreneurs in Small and Medium Enterprises: A Major Force for Innovation and Job Creation, Paris, April 16-18.

European Network for SME Research (1996). Observatoire Europeen des PME, fourth annual report. Zoetermeer: The Netherlands.

Fischer, Eileen M., A. Rebecca Reuber, and Lorraine S. Dyke (1993). "A Theoretical Overview and Extension of Research on Sex, Gender and Entrepreneurship," Journal of Business Venturing 8, 151-168.

Hertz, Leah (1986). The Business Amazons: The Most Successful Women in Business. London: Methuen.

Hisrich, Robert D. (1985). "The Woman Entrepreneur: Characteristics, Skills, Problems, and Prescriptions for Success," in The Art and Science of Entrepreneurship. Ed. by Donald L Sexton and Raymond W Sailor. Cambridge, Mass.: Ballinger Publishing Company.

INSEE--Institut National de la Statistique et des Etudes Economiques (1998). Enquete sur l'Emploi. Paris: Institut National de la Statistique et des Etudes Economiques.

Letowski, Andre (1996). "Le profil des femmes creatrices d'entreprise," paper presented at the Colloque CEE DG-XVI, June 16, Lulea (Sweden).

Mahot, Patricia (1997). "Le financement des femmes chefs d'entreprise, une difficulte reelle, neanmoins controversee," paper prepared for the 1997 OECD Conference on Women Entrepreneurs in Small and Medium Enterprises: A Major Force in Innovation and Job Creation. Paris, April 16-18.

Marlow, Susan (1997). "Self-Employed Women--New Opportunities, Old Challenges?" EntrepreneurshiP and Regional Development 9(3), 199-210.

de Menton, Sophie (1994). "Women Business Owners and the President of the French Association ETHIC," oral interview conducted during the European conference Femmes Argent Entreprise, July 20.

Olm, K., A. Carlsrud, and L. Alvey (1988). "The Role of Networks in New Venture Funding of Female Entrepreneurs: A Continuing Analysis," in Frontiers of Entrepreneurship Research. Ed. B.A. Kirchoff, WA. Long, W.E. MacMullan, and K.H. Vesper. Wellesley, Mass.: Babson College, 658-659.

Riding, Allan L., and Catherine S. Swift (1990). "Women Business Owners and Terms of Credit: Some Empirical Findings of the Canadian Experience," Journal of Business Venturing 5(5), 327-340.

Sexton, D.L., and N. Bowman-Upton (1990). "Female and Male Entrepreneurs: Psychological Characteristics and their Role in Gender Related Discriminations," Journal of Business Venturing 5(1), 29-36.

Veil, Simone (1994). "Allocution d'ouverture, Actes du Colloque Europeen du 20 janvier 1994," Femmes Argent Entreprise, 9-14.

                  Motivations of French Entrepreneurs
                              (means) [a]
Motivations            Women Entrepreneurs  Women Entrepreneurs
                        (1-499 employees)   (10-499 employees)
Independence                  4.26                 4.21
Self-accomplishment           4.19                 4.22
Providing jobs                3.20                 3.57
Revenue                       3.11                 3.06
Participating in
 economic development         2.79                 3.37
Power                         1.95                 2.09
Social status                 1.91                 1.85
Motivations            Men Entrepreneurs
                       (10-499 employees)
Independence                  4.34
Self-accomplishment           4.66
Providing jobs                3.31
Revenue                       3.22
Participating in
 economic development         3.05
Power                         2.58
Social status                 2.23
(a.)Based on a 1-5 scale with 1 = Not important to 5 = Very important.
                  French Entrepreneurs' Self-Appraisal
                  of Business Competencies (means) [a]
Competencies               Women Entrepreneurs  Women Entrepreneurs
                            (1-499 employees)   (10-499 employees)
Commercial                         0.92                0.79
Technical                          1.60                0.73
 ("core" of the business)
Managerial                         0.23                0.92
Financial                         -0.02                0.49
Competencies               Men Entrepreneurs
                           (10-499 employees)
Commercial                        0.82
Technical                         1.42
 ("core" of the business)
Managerial                        1.07
Financial                         0.60
(a.)Based on a -5 to +5 scale with -5 = Very insufficient;
-2 = Insufficient; 0 = Average; +2 = Good; to +5 = Exceptional.
            French Entrepreneurs' Preferences for Developing
                         the Firm (in percent)
Methods                      Women              Women
of Firm                  Entrepreneurs      Entrepreneurs
Development            (1-499 employees)  (10-499 employees)
Internal development          45                  41
Firm or personal              32                  25
 resources
Support from partners          9                  15
Support from banks             9                  11
Acquiring other firms          5                   8
Methods                       Men
of Firm                  Entrepreneurs
Development            (10-499 employees)
Internal development           34
Firm or personal               22
 resources
Support from partners          15
Support from banks             15
Acquiring other firms          14