Women’s entrepreneurship

The business case for expanding women’s economic opportunities is becoming increasingly evident. The ability of women to participate fully and productively in the labor market is constrained in many regions, both by women’s lower educational levels relative to men’s and by social norms. This is inefficient, since increased women’s labor force participation and earnings will enhance not only women’s own economic empowerment, but also that of their children and the society as a whole.

The rate of women’s entrepreneurship is high in Africa—higher than in any other region. However, this is not necessarily a sign of economic empowerment. In fact, although there are no performance gaps between men’s and women’s enterprises once differences in size, sector, and industry are taken into account, research shows that women are concentrated in the informal, micro, low-growth, low-profit areas.

These include food processing and vending, tailoring, batik making, beauty salons, selling charcoal, and producing handicrafts, among others. While women are less likely to be operating larger firms in higher-value-added sectors, those who do so in fact manage firms that perform equally as well as those run by men. Two sets of explanations help to account for why women are less likely to be active in the higher-opportunity entrepreneurship activities.

The first has to do with human capital. Women’s education has continued to lag behind men’s, including in areas of particular relevance to running a business such as financial literacy and management training. The second set of explanations regards control over assets. While business laws are largely gender blind, family, inheritance, labor, and land laws are often not. It is this group of laws that determine legal capacity and control over assets within the household and often limit women’s decision-making authority.

Furthermore, the laws and regulations affecting businesses (including licensing procedures) were designed for relatively large activities, which makes it difficult for micro enterprises to comply with them. Corruption and bureaucracy make matters worse, especially for women who are more vulnerable to physical pressure from corrupt officials.

Finally, the main barrier to performance of women-owned enterprises is a cultural environment that makes it more difficult for women to start and run enterprises because of their traditional reproductive roles: women often must divide their time and energy between their traditional family and community roles and running the business.

Thus the agenda for expanding women’s economic opportunities is not to increase entrepreneurship per se, but rather to enable women to move into higher-value added activities, both in terms of taking the step from self-employment to being an employer, and in the types of activities in which the women entrepreneurs engage.   Increasing women’s human capital (education, management training, business mentors/networks), expanding the awareness of women’s success as entrepreneurs, and improving women’s voice in investment climate policy circles are important steps to achieve these results.

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