Why Women Founded Banks: From Historical Barriers to Financial Inclusion

Corinne Goble still remembers the difficulties her mother faced in the late 1970s when trying to secure a loan for her trucking company. The banker not only referred to the loan as a "pretty legs loan"—slang used in banking at the time to describe loans based on a woman's appearance—but also required her husband to co-sign.

"What the bankers didn't know was that my mother was running the trucking company, and she and my father were in the process of getting a divorce, so there was no way my father would co-sign that loan," says Goble, who now serves as CEO of the Association of Women's Business Centers (AWBC).

Goble says her mother's experience accessing capital as a female business owner was not unique. She adds that the long-standing difficulties women have faced when seeking loans "are exactly why we exist." Goble joined the AWBC in 2019. The organization operates 145 Women's Business Centers funded by the Small Business Administration, providing mentorship, education, and access to capital for women entrepreneurs.

Goble emphasizes that helping women business owners access capital is deeply embedded in the organization's DNA. "That's our reason for being. I just hope that 35 years from now, we can tell you we've overcome the obstacles women experienced back then," she says. "We still hear stories across America of women being asked to provide a husband or male co-signer when applying for a business loan, while a man submitting the same business plan on paper would not be asked to co-sign."

Financial institutions are now working to address this gap, trying to break down some of the barriers women business owners face when seeking loans. On one hand, several large U.S. banks have invested resources and launched initiatives aimed at increasing capital access for women entrepreneurs; on the other, a wave of new women-founded banks (de novo) has emerged over the past few years to fill the void.

New entrants

When First Women's Bank received regulatory approval to begin operations in 2021, its president and CEO Marianne Markowitz declared the bank "the only bank in the nation that is women-owned, women-led, and strategically focused on the women's economy." The Chicago-based institution received investments from legendary tennis player Billie Jean King, Bank of America, and Fidelity Investments. Since then, several other new banks with a core mission of serving women entrepreneurs have been established.

Houston-based Agility Bank, a women-owned and women-operated commercial community bank, opened in May 2022 after pandemic-related delays. More recently, Fortuna Bank—another women-founded de novo bank based in Grandview Heights, Ohio—received conditional approval from state regulators to begin raising capital.

Lauren Sparks, founder and CEO of Agility Bank, says the interest in women-founded institutions with a mission to serve women business owners reflects a growing expectation in American society that bankers and boards at financial institutions should mirror the country's demographics. Sparks led a Houston-based risk management firm for nine years before founding Agility. She says having women involved in all major aspects of business and finance can serve as a "great equalizer" for women entrepreneurs seeking capital.

"Over the past decade of social upheaval, you hear people say: 'Why doesn't the banker look like me? Why doesn't the person in charge look like me or talk like me? Why am I so uncomfortable in those circles? Why isn't it more reflective of the diversity of the community I live in?'" she says. "We are more than half the population, depending on the age group, or half overall. Yet we're not in the boardroom making decisions, and we're typically not the ones deciding who gets capital. That needs to change."

Sparks says the bank's business plan initially focused on advancing opportunities for women-owned businesses, increasing their access to capital, and promoting women's advancement in the financial services industry. But Agility has evolved and expanded its focus to include non-white populations as well. "Because we've created this inclusive environment, our mission is becoming broader," she says. "We offer share and ownership opportunities to people who have never had the chance to own a bank, so our shareholder base is very diverse." While the majority of the bank's shareholders are women, Sparks notes that a significant portion of equity is held by non-white individuals.

"I've personally experienced the journey of having to build a business by talking to people who don't understand you. So I'm committed to creating change by finding conversations with people who understand your situation to create access to capital," she says. "I'm proud to be part of this group of banks that says: 'We believe in the financial system, we believe in the economy, but we want it to be a level playing field.'"

A helping hand

Sparks says she is encouraged by the support her company has received from some large incumbent banks. "Bank of America has been a partner from day one. They help us at the operational level, through their ATM network, to provide cash access in a more cost-effective way, even just for our customers," she says. In small business lending, Agility also uses Citi's Bridge platform—the New York City-based bank recently sold this small and medium enterprise lending platform to Foro. Sparks says JPMorgan Chase has also partnered with Agility to offer an investment opportunity the new bank can offer its customers.

"They each support us in different ways as a minority depository institution, which allows them to proudly say: 'Wow, Agility Bank reaches parts of the community we can't reach, and we helped them.' So it's a win-win for both of us," she says.

Pandemic shock

The social distancing and government shutdowns brought on by the COVID-19 pandemic in early 2020 created difficult times for small businesses, but women-owned businesses were hit especially hard. According to research from the Federal Reserve Bank of Dallas, women entrepreneurs were more likely to bear childcare and at-home schooling responsibilities due to widespread school closures, which meant they had to reduce their working hours. Dallas Fed data shows that the number of self-employed men working at least 30 hours per week fell 22.6%, from 7.2 million in March 2020 to 5.5 million in April; while the number of self-employed women fell 34% over the same period, from 3.2 million to 2.1 million. The research also notes that women-owned businesses were more likely than men-owned businesses to be financially fragile before the pandemic, which may also have contributed to the disproportionate decline in working hours among women entrepreneurs.

The financial struggles women-owned businesses face, such as lack of capital or access to credit, were one of the fundamental reasons Ilaria Rawlins founded Ohio's first women-owned bank. "We are very deliberate about understanding their needs, understanding how they want to be banked, and what's missing from current offerings," says Rawlins. She is the proposed CEO of Fortuna Bank, which received conditional approval from state regulators in August to begin raising capital. Rawlins hopes Fortuna Bank, named after the Greek goddess of luck, will also become a resource and guide for women seeking to build financial confidence.

Rawlins notes that as baby boomers prepare for one of the largest wealth transfers in history, women will inherit the majority of that wealth. "I'm not sure we as an industry, and we as women ourselves, are truly prepared to understand 'What does investing mean? How do I save for retirement?' We've moved far beyond budgeting and day-to-day money management," Rawlins says. "Most women in traditional households handle those things themselves. So, to go further and ask: 'How do we build financial freedom for women and give them the confidence to make decisions that affect their lifelong financial picture?'"

Like Sparks, Rawlins believes women-owned banks help address the demographic imbalance in the small business banking sector, starting with the fact that most commercial bankers are men. "About 75% of commercial bankers are men, which means only about 25% are women," she says. "Think about it: a man who wants to start a business likely has a commercial banker in his network of friends. He can text, call, and have a very casual conversation to learn what he needs to do or consider." Rawlins says women are far less likely than their male counterparts to have such connections. "What we're trying to do, and what I believe other women-owned banks are also trying to do, is make accessing capital, asking banks questions, and building networks feel less daunting. I think there's a tremendous opportunity there," she says.

Good business

Wendy Cai-Lee, founder and CEO of New York City-based Piermont Bank, says serving women-owned businesses is a smart business decision. Cai-Lee, who founded Piermont Bank in 2019, notes that overall, women have higher repayment rates than men. While the bank is not women-owned, Piermont is a minority depository institution. Cai-Lee says more than 52% of the bank's loans are extended to low- and moderate-income communities as well as women- and minority-owned businesses.

Regarding the efforts of women bankers in recent years to build women-owned institutions such as First Women's Bank, Agility Bank, and Fortuna Bank, Cai-Lee says the trend is a response to real demand. "There's definitely demand, that's for sure," she says. "Do I expect to see more banks focused on this space? I certainly hope so. Because if we can prove that there are more banks very deliberately focused on serving women, maybe others will see that this can also be a very good business. It's not about checking a diversity box; it's good business."