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Building the evidence to grow female entrepreneurship

March 17, 2017

Alejandra Vargas Garcia

Senior Program Officer, IDRC

The launch of the first ever United Nations High-Level Panel for Women’s Economic Empowerment in January 2016 has opened a door for think tanks and other research institutions to share evidence on what helps to grow female entrepreneurship. Panel members have sought advice from global thought leaders across sectors to inform an action-agenda for tackling barriers limiting women’s economic empowerment. As a member of Canada’s International Development Research Centre (IDRC), I helped to organize an expert consultation on this topic in May, 2016 at the Urban Institute in Washington, DC, to gather insights for the Panel. Below are some reflections on what we know, what we don’t, and what works to boost female entrepreneurship. 

Interest in evidence about women’s empowerment is on the rise. I have worked in this field for years and believe me, that’s not a statement you hear often. The international momentum behind the women’s agenda is largely due to the recent launch of the first ever UN High-Level Panel for Women’s Economic Empowerment. This Panel has the mandate of providing thought leadership on how to improve economic outcomes for women and girls, within the context of the 5th Sustainable Development Goal on gender equality.

The Panel is composed of twenty members, with a mix of Northern and Southern representatives from the public and private sectors, academia, as well as multilateral and advocacy organizations from around the globe. Fifteen of the twenty members are women, including the Vice-President of the United Republic of Tanzania, the CEO of IKEA, the Executive Directors of UN Women and Oxfam International, and a leading researcher for the Economic Research Institute at the National Autonomous University of Mexico.

The Panel has identified six priority areas for women’s empowerment, one of which is to foster female entrepreneurship and enhance the productivity of women-owned enterprises. The expectation is that Panel members will highlight pathways for accelerating women’s economic empowerment and will take action within their own organizations to move towards those goals. Identifying these pathways will stem from evidence that has emerged from recently-held consultations with researchers (including from both Northern and Southern think tanks), advocates, policymakers, and private sector enterprises from around the globe. Representatives from two of TTI’s partner institutions participated in the consultations: Fundación Salvadoreña para el Desarrollo Económico y Social (FUSADES) of El Salvador and Fundación Aru of Bolivia.

The good, the bad, and the ugly around female entrepreneurship

Through its research program on Growth and Economic Opportunities for Women (GrOW), IDRC facilitated a multi-stakeholder consultation for the UN to discuss what works when it comes to promoting female entrepreneurship. The lessons that emerged were later synthesized and shared with the Panel. Although there are no magic bullets, here is what we know:

The good: Rates of female entrepreneurship are rising, with estimates suggesting that one-in-three formally registered businesses are owned by women.[1] According to the Gender Entrepreneurship Monitor (GEM-2015 data), more than 200 million women entrepreneurs in 83 countries around the world are in the process of starting new businesses, and another 128 million are already running established businesses.[2]

The bad: The rise of women-owned businesses can be overly romanticized. Not all women start a business due to entrepreneurial desire, but due to need and the absence of more and better jobs. Are women better off starting a business? The reality is that very few businesses turn into big enterprises, and this is true regardless of who owns them. Data on what works to support women-owned businesses in particular is not amply available and metrics vary.

The ugly: Challenges for women-owned businesses are substantial, and even more so for those that are informal. In developing countries, 70% of women-owned small and medium enterprises are underserved by financial institutions. This is not unique to developing countries. The credit gap for formal female-owned businesses across regions is roughly $287 billion USD. Against these odds, it doesn’t help that women entrepreneurs tend to concentrate in sectors that are often less rewarding, unregistered, and with limited growth prospects.

Here are some reflections on what experts think we need to better promote female entrepreneurship, and an indication of how think tanks can contribute:

Recognize the ‘bundled constraints’ women face

The challenges women entrepreneurs face are embedded in the larger ecosystem of gender discrimination, which includes gender-based violence, legal barriers (e.g. inheritance, property, and customary laws), and care responsibilities just to name a few.

The World Bank’s Women, Business and the Law Report (2015) showed that out of 173 countries studied, 155 had at least one law that impeded women’s economic development. Good policies need to be mindful of these constraints and how they impact women. For example, women entrepreneurs lend or invest money differently from men in part because their choices are tied to broader household responsibilities, including child and elderly care. The World Bank estimates that women devote 2 to 10 more hours per day caring for children and the elderly than men. Clearly, social and cultural norms impact economic regulations and opportunities. Recognizing and addressing these norms is critical, and think tanks are well placed to help policymakers address these constraints. 

The need for data

Some evidence exists on how interventions such as training, mentoring, and financing can help women entrepreneurs in certain contexts. Is access to technology useful for women’s businesses? Sure. Mobile phones provide market information to women producers. However, technology alone is insufficient for business growth. The fact is: there is little strong evidence on how to sustainably help women’s businesses perform better and grow. We need more data, but coverage in low-income countries remains limited.

Female entrepreneurs are not homogenous. Their behaviours vary across economic classes, sectors, level of formality or informality, and regions. IDRC, through projects like Counting Women’s Work, has made efforts to incorporate women’s non-market contributions to the market economy. On entrepreneurship specifically, data sets by GEM, also supported by IDRC, have helped to track rates of entrepreneurship at different stages and assess the motivations and ambitions of entrepreneurs. Better data is still needed and think tanks, through the research they do, can help collect it and analyze it. 

Networks matter

Participation in business associations, women’s cooperatives, and virtual groups can facilitate information sharing, capacity building, and joint venture taking by female entrepreneurs. The International Trade Centre has emphasized that in fragile contexts like Syria, local institutions like women’s associations and chambers of commerce have been most effective for reaching small and medium enterprises. Martha Chen, co-founder and international coordinator of the Women in Informal Employment: Globalizing and Organizing (WIEGO) network, emphasizes the need for cooperatives and collective bargaining for women entrepreneurs to succeed. There is, clearly, strength in numbers. 

What next?

Despite constraints and data gaps, there is room for optimism. The Gates Foundation just committed 80 million USD over three years to robust data collection to close gender data gaps. The World Bank reports that over the past two years, 65 countries have carried out 94 legal reforms improving women’s economies.

The momentum and work produced by the UN Panel is not the miracle cure, but it’s still significant. Over the past few months, I have actively engaged with over 60 thought leaders from academia, think tanks, civil society, public, and private sectors who have generously devoted time to collect and share best practices on what they know works to empower women. Hopefully the UN Panel will seize this desire for a coherent action agenda and provide needed direction.

Thinks tanks, including those supported by TTI, are well-suited to help implement the Panel’s recommendations at the local level, given that they operate at the intersection of evidence and advocacy, serving as both knowledge creators and translators. Their role in convening networks in policy dialogue will be critical to discuss the types of interventions for boosting female entrepreneurship that are most appropriate for different contexts, support their implementation by governments, and monitor progress. 

This post was first published on the Think Tank Initiative Blog on September 22, 2016.

Alejandra Vargas Garcia is a Program Officer with the Growth and Economic Opportunities for Women program at IDRC.