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A
prerequisite for starting a firm is to have capital in terms of financial
assets but one of the universal problems that SMEs face is lack of access to
capital (Wanjohi et. al 2008). Even after surviving the first few years of
start-up, most business people face the challenge of getting finances to keep
the business running. Some of the studies showing how entrepreneurship is
affected by lack of finances; McCormick et al (1996), Eden (2004), Daniels et
al (2003) and Kinyanjui (2006). The challenges with regards to capital includes
lack of information on where and how to source for capital, lack of access to
finance, lack of access to collaterals, unfriendly lending requirements set by commercial
banks and lack of well laid out structures for financial institutions to deal
with SMEs.

Women
lack the title to property (collateral) in their names and therefore banks find
it difficult to offer them loans. This makes them go through lengthy procedure
of securing loans hence they tend to opt for other risky sources of capital
like the pyramid schemes and shylocks.

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Once more
we can observe large country differences where in the more developed economies,
women on average earn less than men  and also control less wealth compared
to developing economies where women may not even control the money they earn.
For example, both legal and cultural obstacles in countries like Bangladesh,
Mali, or Senegal, make it impossible or at least very difficult for women to
save enough money to start a firm or reinvest money into the growth of the
firm, because at any moment a male family member (husband, brother, brother
in-law) can confiscate the accumulated capital for no other reason than that he
is allowed to, and there exists no protection for women in the respect (de Groot,
2001; Mayoux, 2001).

 

Availability
of financial capital is crucial to the entrepreneurial process. Entrepreneurs
and potential entrepreneurs prefer to invest their own money in their ventures
and therefore they will first draw on the funds that are the cheapest and
proceed to more and more expensive funds. This order is known as the financial
pecking order (Myers, 1984; Myers and Majluf, 1984). Obviously, the perceived
availability of capital to invest in a firm also determines what kind of
opportunity the entrepreneur is ready to engage in. Entrepreneurs with lower
amounts of financial resources will opt for a less capital intensive
opportunity, whereas entrepreneurs with larger amounts of financial resources
will opt for more capital intensive opportunities (which often have a higher
growth potential). Hence, if women have less (or no) access to capital they
will opt for opportunities with less growth potential. In this scenario, we
would observe an evolution over time where women become more and more alienated
from entrepreneurship if they do not get access to more financial resources.

 

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