Female managing directors in the SME sector

No longer an exception, but still underrepresented

• Every fifth SME headed by a woman: 700,000 companies in total
• Represented mainly in the services sector
• Proportion of female managing directors expected to increase

The economic significance of women-led SMEs is substantial – but female bosses continue to be underrepresented in German small and medium-sized business. This is the main outcome of a current evaluation carried out by KfW Research on the basis of the KfW SME Panel. The proportion of women-led small and medium-sized companies has been ranging between 15 and close to 20 per cent since the turn of the millennium. In 2013 – the year with the latest representative figures – it stood at 19.4%.

This means that around 700,000 SMEs are currently headed by a woman. In these companies, there are around four million people working (14% of all employees in SMEs), 112,000 young people are being trained (9%) and EUR 15 billion was invested in new and used equipment and buildings last year (8%). As impressive as these figures might seem at first glance – compared to the share in all SMEs, the weight of women-led companies is disproportionately low when we look at these core indicators.

This is down to the type of company led by women: nearly 60% of the companies with female bosses are from the services sector. These include care, educational and training companies as well as lawyer’s practices, PR offices or financial and personnel consulting firms. Companies in these segments usually have fewer employees and generate a lower turnover than companies in other sectors such as construction, trade and the manufacturing industry.

Nearly every second SME in the “education and training” segment is led by a woman (46%), while in the catering and hotel industry this share only amounts to 33% and in the healthcare, veterinary and social services segment to 30%. In contrast, SME segments where there are very few women at the helm include IT (0.2%) and the motor trade (4%). And female company founders are also remaining true to this trend: they still like to establish service companies (75% of start-ups according to the KfW Start-up Monitor). On the whole, the proportion of women-led start-ups has been increasing for some years. Indeed, it reached 43% of all start-ups in 2014 and even a record high of 41% in full-time start-ups.

“Women are no longer an exception at the executive level of SMEs, but our analysis shows that they still have some catching up to do,” says Dr Jörg Zeuner, Chief Economist at KfW. “The rising number of women-led start-ups will lead to a rising number of female bosses in the SME sector. The face of small and medium-sized companies is becoming more female. In view of demographic change, we have to welcome this development. The decline in the economically active population, the threat of skilled labour shortages and the imminent generational change in the SME sector are clear incentives, if not imperatives, for using the potential of women on the executive floors more intensively than before.”

The complete study, including detailed information by sector (in German only), is available at: www.kfw.de/fokus.