Arkansas is beautiful, and I’m proud to call it home. As a state, Arkansas has been the birthplace of and inspiration for many innovative leaders responsible for creating internationally known artworks, businesses, and movements. Yet even with this progress and success, we have some serious systemic economic and financial challenges. We are facing inequities within our economy that negatively impact Arkansas women and the success of the entire region, holding back the communities where we live, work, and play.
Three million people live in Arkansas—about half of which are women, yet Arkansas consistently performs poorly on studies that monitor women’s economic status and opportunity. In fact, the 2015 Status of Women in the States Report ranks Arkansas among the worst states for women in four of the five most recent reports. The report also lists Arkansas as 50th on a composite index assessing poverty and opportunity, and 47th on employment and earnings. If we want a better future for Arkansas, we need to do something about the status of women in our state.
Women typically invest 90 percent of their income back into their families and communities, while men only reinvest about 35 percent. Investing in women has a multiplying effect, creating communities and businesses that thrive. So, why do we not have more women in leadership positions? Why do we not invest more money in women entrepreneurs? How can we help Arkansas women build wealth?
Wealth is an asset that supports both family and community success and creates a ripple effect that impacts future generations. One of the best ways to build wealth is through business ownership. A 2020 feature by Asset Funders Network highlights that, on average, female business owners have a total net worth approximately four times higher than the average total net worth of full-time working women. It’s a win-win for all—government, businesses, and citizens.
The Year of the Pandemic
Let’s dive deeper. The year 2020 revealed a number of disparities for women who lead or own businesses and brought about what some are calling the “shecession.” Throughout the pandemic, we’ve seen women leave the workforce to become caretakers for children and parents, and we’ve witnessed the decline in drop-in customers for brick and mortar businesses, many of which are owned by women. Anecdotally, we heard the frustration of woman-run businesses in securing capital or grant support. And now the statistical evidence of the capital access for woman-run businesses is showing how devastating the lack of access to capital is for women, and ultimately our state.
Women have historically had issues in obtaining capital through loans or venture capital, but the changes of 2020 put a spotlight on those issues. A recent study on access to capital conducted by the Winthrop Rockefeller Foundation and Winrock International looked at 5 years of Small Business Administration (SBA) loan data from the Arkansas District Office, one of the larger loan backers in the state. While woman-owned businesses account for 43% of Arkansas small businesses, they account for only 5% – 9% of total loan amounts. As for venture capital funding, according to national CrunchBase data, in 2019 women received 2.8% of all venture capital funding – an already low number. This figure decreased to 2.3% in 2020.
With the pandemic disproportionately affecting women and minorities, the capital and wealth gaps are being exacerbated by federal relief programs, such as Payroll Protection Program (PPP), carried out through traditional banking institutions who typically lack relationships or trust within these groups. While PPP has helped many businesses stay open, the initial round to apply for PPP funding was prioritized for businesses with W-2 employees, leaving 89.5% of the 9.9 million woman-owned businesses that do not have W-2 employees unable to apply until the PPP funding was exhausted. Those woman-owned businesses that did receive funding received less money than their male counterparts.
A noticeable gap is the one between business grants and business loans. With the growth and merging of banking institutions, women business owners who are seeking lower-dollar business loans have nowhere to turn. Community banks and Community Development Financial Institutions (CDFIs) often fill this gap, providing support with paperwork and microloans to businesses, but even these institutions are restricted by guidelines associated with funding, meaning sometimes women business owners fall through the cracks.
The funding gap occurs for a variety of reasons. Women are more likely than men to indicate they don’t need financing and more likely to see less favorable loan conditions than men. And yet, while women are statistically under-funded, when they do receive funding, they provide a significantly higher return on investment than their male counterparts. A study recently conducted by the Boston Consulting Group and MassChallenge showed that women-led companies return 78 cents per dollar to investors in comparison to the 31 cents returned on investment by their male counterparts. Clearly, based on those numbers, women aren’t the only ones missing out. We are missing an opportunity to partner with women entrepreneurs in their efforts to build successful local businesses and bolster Arkansas’ future economy.
The gender disparity for businesses ultimately affects us all. According to a 2010 report on Women-Owned Businesses in the 21st Century by the U.S. Department of Commerce, as a result of this lack of access to and use of financing, woman-owned businesses tend to have lower revenues, fewer employees, and are more likely to fail. Women leaving the workforce or not having the access to capital they need to start and grow their businesses is negative for the entire economy. According to McKinsey & Co., by 2030, women leaving the workforce at this rate could reduce the global Gross Domestic Product (GDP) growth by $1 trillion more than it might have fallen otherwise. Supporting women is not just good for women; it’s good for the world; it’s good for Arkansas.
So, What Can We Do?
For the economic health of our state and the wellbeing of the communities in which we live, Arkansas needs state level support of the entrepreneurial ecosystem and small businesses in our state, with a particular focus on women entrepreneurs across the state. This is economic development, and we have an opportunity to build an intentional and inclusive pathway for women business owners to succeed. Women business owners are not at the table for policy conversations affecting small businesses and the state’s economy. In fact, there’s very little small business representation in these conversations. Arkansas requires more support and targeted public policy that supports the entrepreneurial ecosystem, with a specific focus on inclusivity for women and minorities.
We need a statewide effort that brings all stakeholders together to provide communication, education, and access to capital to women starting and running businesses. Our traditional systems – the chambers of commerce, lending institutions, and social networks – must bridge the gap to provide ways for women to engage in these systems. And if products or services don’t work for women entrepreneurs, how might we innovate and change our policies to incorporate products and programs that are appropriate?
Speaking of state level support and the statewide effort of entrepreneurial stakeholders, we need more women in leadership positions, making decisions, and controlling the purse strings throughout the entire network, who are dedicated to shaping inclusive programs.
By investing in women, communities experience transformational economic impact, and we need this in our state. Some of the counties with the highest levels of poverty are also those with the most woman-owned businesses. In the Women’s Foundation of Arkansas report from 2018, Economic Indicators for Women in Arkansas, we find that the highest percentages of women’s business ownership are found in the eastern part of the state, the Delta Region, which overlaps with some of the state’s highest percentages of poverty. We are missing an opportunity to partner with women entrepreneurs to build strong communities around the state, and we have to work together, ensuring that resources reach rural communities as well, not just Central and Northwest Arkansas. Remember—statewide effort means more money and more successful communities for the entire state.
That might sound like a lot, but here’s the thing—we have the resources to do it. And, if we want to build a better future for the generations of Arkansans to come, we have to address root challenges and make systematic shifts in the way we support women entrepreneurs. It is possible with the help of change agents and leaders who have the power to make a difference. And, as a collaborative effort, we have the skill, expertise, and dedication to bring even more money to the state—approaching federal agencies, funders, and others for support so that we can build a model that other states might replicate. Arkansas can be the model state.
Now is the time to come together to support women entrepreneurs—to build a thriving economy, stronger communities, and the place we want our kids to grow up. Every day that we wait for the current system to change, women business owners and the Arkansas economy fall behind.
This is a special feature for Woman-Run co-authored by WLJ’s Meredith Lowry and Jensyn Hallett, CFRE, MS, Director of Impact Capital, Heifer International; Arkansas Invest for Better Lead – an initiative to help women demystify impact investing, take control of their capital, and mobilize their money for good; and Founder of Jensyn & Co. – a company dedicated to creating a powerful, inclusive, and purpose-driven economy.