Any failure to integrate women fully into the workforce is particularly costly in terms of GDP … It’s clear that women can add incrementally to a developing nation’s economy.
Summary: A key group of financial organizations is helping women seize more opportunities. They've identified four building blocks for success: financial services, training, a regulatory regime that doesn't undermine women and confidence.
Organizations backing women entrepreneurs
No economy can afford to squander any resource, particularly a resource as valuable as the energy and talents of half its population.
However, even in the industrialized world, no country offers women the same degree of opportunity as men1. And in developing nations, there are often substantial barriers that keep women from earning a living.
What actions are organizations taking to break down these barriers?
- United Nations: The United Nation's Third Millennium Development Goal, "Promote gender equality and empower women," reflects the role of women in ending poverty. However, the Goal's primary target is an educational one: "Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015." Yet economic participation and opportunity, which are as crucial to women's empowerment as education, have traditionally not drawn much consideration in development policy.2
- The World Bank: In January 2007, The World Bank put in place a Gender Action Plan, Gender Equality as Smart Economics, in order to both improve women's economic opportunities as a matter of policy. It also assists individual women in entering and competing in the marketplace.3 In 2008, World Bank President Robert Zoellick expanded this effort, announcing six additional commitments to gender equality.4. One of them was creating the Private Sector Leaders' Forum, a group of influential people in business and academia who are working together to promote women's economic empowerment.
- Ernst & Young: Ernst & Young is a member of the Private Sector Leaders' Forum. At Ernst & Young, advancing women has long been a priority both in our own operations and our community engagement. So has advancing entrepreneurship: our Strategic Growth Markets practice has helped many of the world's most dynamic young companies grow into industry leaders. We are well aware that entrepreneurs of all sizes are engines of economic growth in every economy. We see assisting women entrepreneurs as one of the best ways to fight both poverty and inequality.
Why Women? Why entrepreneurs?
When you don't incorporate women in the workforce, you risk losing GDP.
How much GDP can be lost? Sometimes billions of US dollars. A United Nations report on Asia and the Pacific countries found that the region is losing between US$42b and US$46b each year because of restricted job opportunities for women.5
It's clear that women can add incrementally to a developing nation's economy. However, raw numbers still fail to capture the full significance of women's contributions in the developing world.
For example, women also spend a far greater percentage of their wages on the next generation than men do6. So there is almost always a multiplier effect when a woman moves into the workforce. Specifically, they use their income to provide:
- Better food
- Education for their children
- Raise their children's economic prospects
And the multiplier effect can increase exponentially if the woman starts her own business and begins to create jobs. A recent New York Times Magazine story features a Pakistani woman named Saima Muhammad, who was once so poor that she couldn't afford to feed her daughter. With a US$65 loan, she was able to launch an embroidery business that now employs 30 families.7
Financial services for women entrepreneurs
Women in developing nations often lack the capital to start a business and they face many barriers in being granted loans and other financing.
Microfinance — with its collateral-free small loans — has freed tremendous entrepreneurial energy among women in developing countries.
However, as Meral Guzel of The World Bank Institute points out, at a certain point, women-owned Small and Medium Enterprises (SMEs) need to move beyond microfinance. "If the business is doing well and showing good prospects of growth after receiving microfinancing (microcredit or loan) received from family members", Meral explains, "we arrive at what we call an 'SME-gap.' For example, perhaps a woman successfully sews T-shirts at home. Suddenly, a new client may approach her asking for a thousand T-shirts per month. To meet this demand, she will need capital to buy a machine and hire people, and as a new SME entrepreneur, she will need a professional relationship with a bank."
The World Bank is working to foster these relationships and allow women-owned SMEs to expand their enterprises. In 2008, through its International Finance Corporation, it pledged to make an additional US$100m in credit lines available to women-owned SMEs at commercial banks by the end of 2012.8
Additionally, Meral has developed The World Bank Institute's Access to Finance for Women Entrepreneurs program that shows local trainers how to teach women entrepreneurs about approaching a bank, developing a business plan, forecasting sales and understanding the finances of their business.
Regulatory regimes that don't undermine women
Even at the beginning of the 21st century, women are hampered by laws that deny them the same rights as men.
Laws like these are clearly costly in terms of economic development.
The number of small, women-run businesses in the Democratic Republic of Congo where women need their husband's permission to start a business. 9
The number of small, women-run businesses in Rwanda where women don't need their husband's permission to start a business. 10
In 2007, The World Bank Group's Doing Business project, which measures regulations and their effects on small- to medium-sized enterprises, started documenting the legal and regulatory barriers women entrepreneurs face.
What did they find?
A regulatory climate that makes it easy for entrepreneurs of both sexes to start or run a business encourages the participation of women in the workplace. In countries that rank high for their ease of doing business, women's unemployment is low and there are numerous women entrepreneurs. In countries that rank low, the opposite is true.11
Women entrepreneurs need confidence
Even when there are no legal barriers to starting a business, courage is still required. As the Global Entrepreneurship Monitor (GEM) has documented, "Perceptual factors that reflect optimism, self-confidence, and reduced fear of failure are important predictors of women's entrepreneurship."
In this, women are no different from men: those of both sexes who launch businesses tend to be optimists with a high tolerance for risk. Yet, even among entrepreneurs, there is a gender gap in confidence. Women are often more afraid of failure.12
GEM has identified the most important factors that encourage women to put aside their fears and start a business. Interestingly enough, household income and educational attainment are not as important as two other factors:
- Being employed
- Having a network that includes other entrepreneurs.13
Yet, in developing countries, girls often fail to move from school to employment, derailed in many cases by early marriage and motherhood.
In South Asia, 42% of girls between 15 and 19 are neither studying nor working for pay.
In sub- Saharan Africa, 26% of girls between 15 and 19 are neither studying nor working for pay.14
Another significant confidence builder identified by GEM is having a social network that includes other entrepreneurs.
The NGO Vital Voices Global Partnership has been particularly active in encouraging women business leaders around the globe to exchange ideas and serve as role models for each other. Its projects include the Africa Businesswomen's Network and the Fortune/US State Department Global Women's Mentoring Partnership, which brings emerging business leaders in developing economies together with women executives at Fortune 500 list companies.15
The World Bank Institute's Access to Finance for Women Entrepreneurs program also recognizes the importance of role models.
Ultimately, every impoverished woman who manages against all odds to become a successful entrepreneur is heroic. And that heroism is why The World Bank and its donor nations, as well as leading businesses, universities and NGOs are now focused so intently on lending women-owned SMEs a hand. If you give a woman in a developing country just a little bit of support for a business, she may well leverage that support into a brighter future for herself, her children, her neighbors and the world that we all share.
- 1 Ricardo Hausmann, Laura Tyson, Saadia Zahidi "The Global Gender Gap Report 2008", World Economic Forum, p. 17, Donor Dynamics, April 2010.
- 2World Bank Group, "Gender Action Plan 2-Year Progress Report", p.1.
- 3World Bank Group, "Gender Action Plan 2-Year Progress Report" p, iv.
- 5Ricardo Hausmann, Laura Tyson, Saadia Zahidi "The Global Gender Gap Report 2008", World Economic Forum, p. 22.
- 6UNICEF "The State of the World's Children - 2007 report", Chapter 2.
- 7Nicholas D. Kristof and Sheryl WuDunn "The Women's Crusade", The New York Times Magazine, August 23, 2009.
- 8World Bank website
- 9Doing Business, Gender Law Library.
- 10Carmen Niethammer, Mark Blackden, and Henriette von Kaltenborn-Stachau, "Creating Women Entrepreneurs in Conflict-Afflicted Societies", SmartLessons, International Finance Corporation, April 2008, p. 4.
- 11Simeon Djankov, "Opportunities for Women", Doing Business 2008 presentation, slide 10.
- 12Elaine Allen, Amanda Elam, Nan Langowitz, Monica Dean, "Report on Women and Entrepreneurship", Global Entrepreneurship Monitor 2007, Global Entrepreneurship Research Association, 2008, pp. 9-10.
- 13Elaine Allen, Amanda Elam, Nan Langowitz, Monica Dean, "Report on Women and Entrepreneurship", Global Entrepreneurship Monitor 2007, Global Entrepreneurship Research Association, 2008, p. 10.
- 14Ready for Work Fact Sheet, World Bank.
- 15Vital Voices website