Funding Access Triples Likelihood of Business Start-Up Plans
World

Funding Access Triples Likelihood of Business Start-Up Plans

Relationship matters more in the developing world and for women

WASHINGTON, D.C. -- Worldwide, adults who have access to the funds to start a business are three times more likely to say they are planning to start a business in the next 12 months (18%) than those who do not have access to money (6%).

Entrepreneurial intent and access to funds

Entrepreneurial intent varies worldwide, with residents in sub-Saharan African countries the most likely to say they plan to start a business in the next year. Having access to the money to start a business positively relates to plans to start a business in the next 12 months nearly everywhere. For example, access to financing more than doubles the likelihood that adults in sub-Saharan Africa are planning to start a business in the next 12 months from 16% to 39%. Twenty-two percent of adults in Asia with access to money to start a business say they plan to start one, quadruple the 5% of those without this access.

Having access to money does not seem to be as important in the developed part of the world. In the U.S. and Canada, for example, those who say they have access to money to start a business are not much more likely than those who don't to say they plan to start a business in the next 12 months -- 9% vs. 7%, respectively. Among EU residents, however, the relationship is stronger, with access to finance more than tripling the intent to start a business from 2% to 7%.

In Northern America, higher living standards, personal wealth, high-risk tolerance, and financial inclusion suggest that financing is not a major constraint to entrepreneurship in this part of the world. Even if an individual does not have immediate access to money to start a business, he or she may be more likely than those in the developing world to be confident that he or she can secure the funding needed in the near future.

Although financing constraints exist in emerging as well as advanced economies, credit constraints are likely to be most acute in the emerging markets. Entrepreneurs in emerging economies usually fund their new ventures through their personal savings or money from their family and friends. But, as these businesses expand, they often find it difficult to obtain financing through traditional suppliers of credit such as banks or capital markets that are much more comfortable lending to larger businesses.

Financial Access Matters to Aspiring Female Entrepreneurs

While men and women worldwide who have access to the funding needed to start a business are more likely to say they are planning to start one, access to funding makes more of a difference among women. Women who have access to financing are four times more likely to plan to start a business (16%) than those who do not (4%), while men who have access are nearly three times as likely to start a business (20%) as those who do not (7%).

Entrepreneurial intent, by gender

Studies indicate that women worldwide are less likely to have owned a business previously or have any business-related training. Thus, lenders view women as a more risky investment because it is difficult to assess their creditworthiness. The lack of prior business experience also makes women less likely to seek financing, and less likely to receive it. Policymakers must consider these factors when designing policies to encourage access to finance for female entrepreneurs.

Implications

These results underscore that access to capital is a key determinant of starting a new business or growing an existing one. Many policymakers worldwide are currently devoting considerable attention to alleviating financing constraints for would-be entrepreneurs. For example, the Jumpstart Our Business Startups Act the U.S. House of Representatives recently passed allows small businesses to solicit funding up to $2 million, in some cases, from small investors through social media and reduces the cost of going public. The EU has budgeted more than 1 billion euros to provide financial assistance to about 300,000 to 400,000 small and medium-sized enterprises by 2013.

Still, access to money to start a business remains a barrier in many nations. Without access to financial services, a talented potential entrepreneur could find it difficult to enter new product markets or expand his or her operations and remain competitive. Future entrepreneurial activity -- and thus job growth -- across economies will depend on the ability of the markets to select and finance the most talented entrepreneurs.

For complete data sets or custom research from the more than 150 countries Gallup continually surveys, please contact SocialandEconomicAnalysis@gallup.com or call 202.715.3030.

Survey Methods

Results are based on telephone and face-to-face interviews with approximately 1,000 adults, aged 15 and older, in 98 countries, 2,000 adults in Russia, 3,000 adults in India, and 4,200 adults in China. All surveys were conducted in 2011. For results based on the total samples of national adults, one can say with 95% confidence that the maximum margin of sampling error across the regions analyzed ranged from ±2.1 percentage points to ±3.9 percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more complete methodology and specific survey dates, please review Gallup's Country Data Set details.


Gallup http://www.gallup.com/poll/153317/Funding-Access-Triples-Likelihood-Business-Start-Plans.aspx Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030