Pick any country in the developing world.
Where are the women entrepreneurs in Pakistan?
They start and manage digital-content creation firms serving international clients. They are sole proprietors of construction businesses bidding for government projects. They supervise tailors and embroiderers in windowless storage rooms that double as stitching units. They export high-end gems and jewelry around the world.
Women entrepreneurs in Pakistan lead cutting-edge, innovative businesses – but there are far too few of them. The recent Global Entrepreneurship Monitor report finds that only 1 percent of Pakistani women are engaged in entrepreneurship – the lowest proportion in the world.
Pakistan is not alone in its dismal ratio of growth-oriented (or indeed any kind of) women entrepreneurs. Even in the developed Asian economies of Korea and Japan, only about 2 percent of women are entrepreneurs. Sub-Saharan Africa does much better in this regard, with 27 percent of women, on average, engaged in entrepreneurship -- but they are mostly involved in low-productivity sectors of the economy.
Women entrepreneurs, in Pakistan and globally, have narrow networks of friends and family who provide them with some initial capital to start their small businesses, with little expectation of further financial support. Their export customers are located wherever they have extended family. And they rarely feature in local chambers of commerce activities.
Banks are often reluctant to extend lines of credit to, provide working capital to or lend to women-led enterprises. This makes it difficult for these enterprises to pursue growth. Perhaps this is why the average growth projections for women-led enterprises are seven to nine percentage points below those for their male counterparts.
The importance of dividing entrepreneurs into two distinct categories: transformational and subsistence was the topic of an inspiring talk of MIT Professor of Entrepreneurship and Finance, Antoinette Schoar at the World Bank. In crude terms, subsistence entrepreneurs are solely concerned about their survival, and are tiny businesses and unlikely to grow or create new jobs. However, it needs to be said that they remain an important economic pillar, especially for developing countries. Contrarily, transformational entrepreneurs, the considerably smaller group of the two, strive for growth, are generally larger business owners, and provide relatively secure employment opportunities for others. They are the catalysts of innovation, job creation, productivity, and competitiveness. This leads to a crucial question for development – should we target our policies towards entrepreneurs with transformational qualities even though they may not be the poorest of the poor since these are the ones that create more, sustainable and (often) productive employment?
Agribusiness can help Nepal's products claim a larger share of the global market (Credit: World Bank)
Take a moment and think about where you would go for the best tea, coffee or dumplings. Would a country like Nepal rank high on your list, or for that matter even be on your go-to list? For a majority of people, maybe not immediately. Yet I would argue that the country should actually rank very high on your list (in full disclosure, this post and report are about agro-processing in Nepal).
On the flip side, the question for the Nepalese and interested agro-processors comes back to, well how do we make it rank at the top of anyone’s list? The food is already above standards and extremely palatable, thus it wouldn’t be very difficult to market. And imagine the type of marketing and branding that could be used; Himalayan grown, grown in the cool climates of the Tibetan mountains, and so on.
“You have a good social project, but it is not an investable company”, I heard fellow judge and technology activist Mariéme Jamme say to a South African entrepreneur who had just given his best business pitch. He was taking part in the Dragons’ Den at the 5th Global Forum on Innovation and Technology Entrepreneurship, a fantastic 3-day learning and networking event organized by the World Bank’s infoDev and the South African Department of Science and Technology. You could see the entrepreneur (let’s call him ‘B.’) gasping for air, and one could hear a pin drop in the completely filled auditorium of the Global Forum. Over 800 people, mostly entrepreneurs, financiers, policy makers and technology ‘evangelists’ from all over the world had gathered here.
Last April 21, representatives from government, the private sector, and the financial inclusion world came together for Financial Inclusion Pathways for Women and the Poor. Panels covered a range of topics, including financial education, mobile banking and SME finance. But at the heart of all the discussions was the challenge posed by 2.5 billion unbanked people around the world –1.35 billion of them women. What actions can the public and private sector take to give the financially excluded—especially women who have the potential to transform economies-- access to finance?
The difficulties faced by Small and Medium-sized Enterprises (SMEs) in getting finance, especially in the developing world, have been well documented. The causes are equally well known. First, traditional bank financing (secured or cash-flow based) is often not available due to the lack of adequate collateral or the opaque modus operandi of many SMEs. Also, financial markets may not be sufficiently well developed to facilitate traditional private equity (PE) financing of SMEs. A typical private equity (PE) firm or fund requires controlling positions in a company it invests. But in Sub-Sahara Africa, most small businesspeople are both owner and operator of lifestyle businesses and have little interest in letting go of control of their company. Another constraint to the traditional PE financing model is the lack of exit channels such as a well-functioning initial public offering (IPO) or merger and acquisition (M&A) market.
Like every other development institution, The World Bank Group's International Finance Corporation (IFC) is deeply concerned with how to create more and better jobs. There’s no question that jobs are the key issue in any discussion about ending poverty. The 60,000 poor people who participated in Deepa Narayan's Voices of the Poor study 13 years ago were right—jobs are the surest way out of poverty for people across the world.
Today, IFC publishes a report on the findings of a study about how jobs are created by the private sector. Given the private sector provides 90 per cent of jobs, the estimated 600 million that need to be created by 2020 will inevitably have to come from the private sector.
Please watch Women Entrepreneurship to Reshape the Economy through Innovation in MENA, at the European Development Days live on Tuesday October 16 at 11:00 AM cet
Across the developing world, women business owners are far more prevalent at the informal and micro-scale than growth oriented small and medium sized enterprises. Women still face an uneven playing field in education, employment, earnings, and decision-making power.
The Middle East and Northern African (MENA) region faces its own particular set of challenges. In the aftermath of the Arab Spring, the development of strong economies and opportunities for both men and women to pursue a livelihood without barriers is integral to the future of the region. There is an enormous enterprise and job creation agenda to be fulfilled in the Middle East. A recent study by the OECD notes that today, only 27% of women in the region join the labor force, compared to 51% in other low, middle and high-income economies, and only 11% are self-employed, against 22% of men.
Empowering women entrepreneurs is good for development and business. Tune in to World Bank Live on October 11, 2012 10:30 a.m JST. to hear Liberia President Ellen Johnson-Sirleaf and World Bank Group President Jim Kim talk #womenbiz at this year's Annual Meetings.
I’m in Tokyo. The changing colours of the autumn leaves, which would normally preoccupy the nation and its visitors, have been replaced – well, in Tokyo anyway – by fluttering street banners announcing the fact that the city is hosting the 2012 IMF/World Bank Group Annual Meetings. There’s a throng of people – 20,000 is the number bandied about – representing government and private sector delegations from around the world, and they are all here to discuss the status of international economic and financial developments for inclusive growth.
As Director, Women’s Markets, Westpac Group and because of our leadership as a corporation and a country in promoting women’s access to finance, I’ve been invited by the IFC, a member of the World Bank Group, to attend a number of events focused on women in the private sector.
In many developing economies, between 30 and 40 percent of the entrepreneurs running small or medium sized businesses are women.
Cultural and legislative barriers, such as preventing married women from opening bank accounts, or restrictions on women’s work, are becoming less overt in many places. However, women entrepreneurs – be it in first, third or the developing world nations - often find it difficult to raise capital to grow their businesses and for all sorts of reasons.
They had to do something different, something memorable, which would make people realize just how tough it is for small businesses in the Caribbean to survive, “So we held a funeral”. Rosalea Hamilton, the President of the Jamaica-based MSME Alliance explained that they staged a funeral to mourn for the death of small and medium enterprises (SMEs) in Jamaica. The objective was to draw attention to a petition presented to the Prime Minister on ways to support the sector. As the poster for the event underscored, if nothing changed to help Caribbean entrepreneurs, their ventures were as good as dead.
According to Rosalea, one of the top challenges facing businesses in Jamaica is the cripplingly high electricity costs, which can account for 25% of a business’s expenses. Jamaica, along with many other Caribbean countries, is highly dependent on foreign oil. This is in spite of numerous domestic natural resources that could be used to move away from fossil fuels, such as solar, wind, and geothermal energy, biofuels such as bagasse, and waste-to-energy systems. Given the high energy prices, start-ups developing alternative energy solutions should thrive in the Caribbean. But ask regional cleantech entrepreneurs, and a different story emerges.