The Missing Half of Capital: Unlocking Finance for Women-Led Firms in Europe and Central Asia

Daksh Baheti, Lucero Burga, Anna Fruttero and Lucia Luzi

No 11379, Policy Research Working Paper Series from The World Bank

Abstract: This paper analyzes why women-owned and led small and medium-sized enterprises in Europe and Central Asia face persistent financing gaps and discusses ways to reduce them. Using a journey-mapping framework, the paper identifies 49 barriers faced by women-entrepreneurs in accessing debt and equity finance across three domains: demand-side frictions, supply-side frictions, and ecosystem-level constraints. Drawing on available evidence, the paper documents the presence of 13 barriers in Europe and Central Asia, including limited collateral, unfavorable loan terms, loan officer bias and misaligned incentives, regulatory gaps, and informational asymmetries. The paper reviews 27 interventions from global experience that have been evaluated as mechanisms to relax these constraints. For debt financing, these include asset-collateralized lending, psychometric credit scoring, flexible and innovative contract structures, tailored products for women, and incentive reforms for loan officers. For equity financing, the evidence points to investment-readiness programs, promotion-focused pitch strategies, and approaches to reduce investor bias by exposing investors to role models and sector-specific information. Further, digital financial services can lower entry barriers and expand alternative credit data; however, more sex-disaggregated evidence is needed to establish causal pathways in relevant contexts in Europe and Central Asia. Finally, the paper proposes three priorities: (i) systematically diagnosing and prioritizing constraints using sex-disaggregated data; (ii) adapting and scaling interventions with demonstrated effectiveness while continuing to innovate where evidence remains thin (particularly in equity financing); and (iii) embedding rigorous monitoring, evaluation, and documentation to accelerate learning and supporting effective scale-up.

Date: 2026-05-13
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