Evidence of Gender-Bias in Early-Stage African Entrepreneurial Finance

Abstract

This paper investigates gender-related bias in equity, debt, and philanthropic contribution financing decisions for early-stage African entrepreneurial ventures. Utilizing a series of individual estimations and a two-stage Heckman Selection Model on questionnaire results from 2,812 early-stage entrepreneurs in Ghana, Kenya, Nigeria, Tanzania, Uganda, and South Africa, I find substantial evidence of a negative effect of having a female primary founder on the probability of being selected for equity funding, but that this bias does not persist in the amount of equity funding the start-up attracts. In the case of debt and lending finance, female entrepreneurs are subject to a lower probability of being selected for funding and smaller total amounts of debt financing. Philanthropic contributions present an interesting alternative, and do not have any significant gender bias in the initial funding selection or in the amount of funding provided. These results are crucial for understanding how female African entrepreneurs are able to fund their businesses and their success in obtaining funding. This paper provides policy recommendations for encouraging female entrepreneurship in Africa, which has been shown to contribute to long-term sustainable economic growth.