CANBERRA — “It’s a topic whose time has arrived,” Nancy Lee, a development financing expert, told the audience gathered at the Center for Global Development on Sept. 7. That topic is women entrepreneurs and understanding what really helps them start and grow businesses.
Today women are as likely as men to recognize the business opportunities around them. In Africa and most of Asia, fear of business failure rates among women are equal to or less than that among men. Women consider themselves strong innovators. In developing countries in particular, the opportunities offered by women entrepreneurs help grow markets and increase employment prospects.
But despite progress, the topic is important to the development community because of the challenges that remain and the fact that the gender gap remains a global phenomenon. “This is not a developing country issue — it is a global issue,” Lee said. “There are only about 10 countries in the world where entrepreneurship is equal.”
Why are women entrepreneurs important?
Existing information shows that women-owned small and medium enterprises globally tend to be concentrated in overall low-profitability or low-growth sectors. Retail, beauty and food services are among the sectors in which women focus. In Africa and Asia, about 75 percent of women are in these consumer-oriented sectors.
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“They are rarely in mining, construction, electronics and software,” Caren Grown, senior director for gender at the World Bank, explained to the audience.
The problem is that this centers women in sectors that are low earning and domestically focused with low prospects of economic and business growth, which Grown says helps explain the gender earnings gap.
Focusing on these sectors also limits financial opportunities, with banks considering these businesses less of an investment opportunity. Grown explained that SMEs in particular were important because they have a jobs creation function in all economies around the world. Encouraging more women to own SMEs increases job prospects.
But there is opportunity for far greater economic advancement. When women cross over into male-dominated sectors, they can earn three times as much as in traditionally female-dominated sectors.
By encouraging women to enter male-dominated sectors — and thereby changing the mindset of financial lenders and providing new opportunities for women to learn, grow and develop entrepreneurial businesses — women in developing countries can escape poverty and improve their country’s economic condition.
CEO and co-founder of WEConnect International Elizabeth Vazquez explained that for the private sector, there are good business reasons to embrace women entrepreneurs: It can lead to greater profitability and enable them to better anticipate the needs of their market. “You can’t do that if half of the population is represented by women but all of your suppliers are men,” she said.
What information are we missing on women entrepreneurs?
To advance our understanding of the differences between male and female entrepreneurs, country impacts, biases and economic impacts, good data is required. But Grown explained to the audience that data is severely lacking — including being able to distinguish between micro and small businesses.
“The picture is mixed,” she said. “There is a lot we don’t know.”
Improvements to available data is an important initiative that is seeing progress. The gender entrepreneurship monitor has become an important source of information that helps distinguish the impact of male and female entrepreneurs in growth and necessity-operated businesses. Enterprise statistics data, collected by the World Bank, is helping to recognize the global divide and showing that women own only about 30 percent of formally registered business worldwide. And a partnership between Global Banking Alliance for Women and Data2X is improving access to women’s financial inclusion data to tackle issues banking institutes face, including understanding demand and supply and differences in needs and investment of men and women.
What are the barriers for women?
Access to finance is a huge barrier for the advancement of women-owned businesses.
Grown explained that financial institutions perceive women to be “riskier clients, higher cost clients and lower return clients,” which negatively influences their investment in women entrepreneurs. ”This is despite facts suggesting otherwise,” she said.
In analyzing more than 2,000 financial and banking firms, the World Bank found SME clients were performing well, but overlooked. “We need to think more about what we do with financial institutions,” Grown said.
Rebecca Ruf, vice president of programs for the Global Banking Alliance for Women, explained that her organization has 45 member banks supporting women-owned businesses. “You would think there would be hundreds and hundreds,” she said.
But even among these “converted” banks, an annual survey on the banking of women found that only 35 percent of their customer base was women. “We have a long way to go,” Ruf said, explaining that commercial banks were not aware of the market opportunities and lacked understanding on the differences in financial behavior between men and women.
In developing countries in particular, financial barriers can be combined with legal and policy barriers and discrimination — including inability of married women to travel without a male escort, barriers to identification cards, and legal constraints around signing contracts on their own, accessing bank accounts or registering businesses. Other constraints include occupation segregation, lack of networks and limited links to high-value markets.
What is working to encourage women entrepreneurs?
Through existing programs targeting women entrepreneurs, the World Bank is beginning to produce real data and information on what is working to encourage economic advancement of women in developing countries.
The World Bank’s Gender Innovation Lab is looking for the gold standards and so far have 15 impact evaluations on what works in the area of female entrepreneurship from sub-Saharan Africa, South Asia and Latin America.
A key finding is that training for women needs to be different.
“Standard business training does not work as well for women as it does for men, and we know a lot about the way training related to entrepreneurial skill needs to be delivered,” Grown said.
Personal initiative skills development is important for women. But exposure to male-dominated sectors is also important. “It’s an opportunity to find women in growth sectors and tell their story,” Vazquez said, which would enable women to see themselves in those shoes.
Improved mentoring opportunities from men, with introductions to new markets, would also break down barriers. “The work we did with men is important,” Grown said. “They have different networks and they are important in helping women to cross over.”
Changing behavior of banks and attitudes toward women-owned businesses to improve financial access and behavior of governments to eliminate policies restricting women in business were also important initiatives encouraging women entrepreneurs.
New funding initiatives supporting women-owned businesses
The World Bank’s new Women Entrepreneurs Finance Initiative, first announced in July, will soon be accepting applications from all multilateral development banks to receive grant financing for programs and initiatives supporting the development, growth and market opportunities for women-owned businesses in developing countries.
Grown explained that solutions to encourage women to start and grow businesses need to be bundled — and this is the idea of the Women Entrepreneur Financing Initiative. “It has currently mobilized more than $325 million in grant finance with the specific objective of enabling more than $800 million in finance from the commercial finance sector, which will enable more than $1 billion in financing for female-owned SMEs.”
Thirteen countries led by Germany and the United States have partnered with the World Bank to fund the initiative.
Karen Mathiasen, acting U.S. executive director for the World Bank, explained that a score sheet is being developed to rate proposals, which will include scalability and how they target poorer economies. “We really want them to go into hard environments.” And the World Bank will draw on technical experts to assess applications — men and women who know the topic and are best placed to allocate fund to areas of greatest impact.
The initiative is part of an important global focus on women entrepreneurs from development donors and the development sector, and the timing is important in order to meet gender and economic targets within the Sustainable Development Goals by 2030.
“The evidence is pointing to a major scope for growth benefits if we can help women entrepreneurs effectively, and we can help them out of low productivity tracts,” Lee concluded.
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