We-Data: Measuring the gap in female entrepreneurship around the world

Measuring women’s entrepreneurial activity is critically important for a better understanding of how female entrepreneurs contribute to the economy and society . However, the lack of comprehensive gender-disaggregated data on business entry and ownership presents an obstacle to the global analysis of female entrepreneurship. Due to insufficient standardized and internationally comparable data, the diagnostics of gender gaps in entrepreneurship are limited. 

To address this issue, the We-Data project financed by We-Fi collects and publishes global gender-disaggregated data on business entry. It looks at the difference in the number of female and male business owners, business directors and sole proprietors. Gender disaggregated data on entrepreneurship are available in 81 economies and cover the 2014-2020 period. 

How Big is the Gap in Female Entrepreneurship? 

An intuitive way of measuring the gap in female entrepreneurship is to compare the number of women and men who start or manage a new business. Worldwide, the share of female entrepreneurs tends to be lower than the share of male entrepreneurs in the three categories: the owners of limited liability companies, directors of limited liability companies and sole proprietors.  

In all economies, there are more men than women who own or manage limited liability companies. Women represent on average 1/4 of new business owners and directors while men stand for 3/4 of new business owners and directors. 

The rates of female participation for sole proprietors are slightly higher. The average share of female sole proprietors is about 1/3 compared to 2/3 for the average share of male sole proprietors. In a few rare instances, there are more female sole proprietors than male sole proprietors. This is the case in Austria, where women represented 54% of new sole proprietors in 2020. However, a sole proprietorship is usually for small scale, low-profit and low-risk businesses. A sole proprietorship does not protect personal assets of entrepreneurs and is limited in terms of expansion. While this type of company can be a good way to enter formal entrepreneurship, it can prevent women from growing their business.  

 

Figure 1. Women represent on average a 1/3 of new sole proprietors 

 _{Source: We-Data Project} 

Another way of looking at the gap is to compare the percentage of women in the entrepreneurs’ population with the percentage of women in the adult population. In an ideal world, entrepreneurs should reflect the society they live in.  However, this is not the case in practice.  

For example, while women represent 50% of the adult population in Somalia, they only stand for 2% of new business directors (Figure 2).  

Economies in East Asia and the Pacific tend to perform slightly better than other regions when it comes to the shares of female business directors. In Malaysia, Lao PDR and Thailand, the difference between the share of women in the number of business directors and the share of women in population is less than ten percentage points. 

Figure 2. Economies in East Asia and Pacific tend to have the highest shares of female business directors 

 

_{Sources: We-Data Project, WDI database} 

 

How Did the Gap in Female Entrepreneurship Change Over Time?

The gap in female entrepreneurship remained widespread and stable over the past years. From 2014 to 2020, the average share of female entrepreneurs was way below the share of male entrepreneurs (Figure 3). 

The levels of participation of women in sole proprietorship showed some upward variation over time. The average share of female sole proprietors increased slightly – by 2 percentage points between 2014 and 2020. This change is mainly due to an increase of female sole proprietors in several low-income countries such as Benin, Guinea and Rwanda, where the share of female sole proprietors increased from 34% to 49% in Rwanda (+15 percentage points), from 22% to 32% in Guinea (+10 percentage points) and from 27% to 34% in Benin (+7 percentage points).  

 

Figure 3. The share of female sole proprietors slightly improved over time  

 _{Source: We-Data Project} 

What Factors Could Influence the Gap in Female Entrepreneurship?

The gender gap in entrepreneurship reflects recurring underlying disparities and tends to signal strong inequalities in access to institutions . When the rule of law is weak, it hinders development and can prevent women from safely entering the entrepreneurial world. When the rule of law is stronger, the share of female entrepreneurs also tends to be higher (Figure 4). Due to legal constraints around the world, women do not have the same ability to start and operate a business in the same way as men. 

 

Figure 4. A wide range of factors tend to explain why the gap in female entrepreneurship remains considerable 

_{Sources: We-Data Project, World Governance Index, IHME Database, Findex, UNDP Gender Social Norms Index} 

Education is also critical for fostering female entrepreneurship. However, secondary education completion rates for women tend to be lower than secondary education completion rates for men. In South Asia, 60% of men have at least some secondary education, compared to 40% of women. In Sub-Saharan Africa, 39% of men have at least some secondary education, compared to 29% of women. South Asia and Sub-Saharan Africa tend to have the lowest levels of business entry – with a median new business density below 1 new limited liability company per 1,000 adults. Economies where women have more years of education also have relatively higher numbers of new female entrepreneurs, at the level of both business owners and sole proprietors (Figure 4).   

Access to technology also tends to foster entrepreneurship. When it comes to access to digital platforms, the gender gap also persists. Currently, about 327 million fewer women than men have a smartphone and can access the mobile internet worldwide. On average, women are 26% less likely than men to have access to a smartphone. Bridging the digital divide between men and women is one step to addressing overall gender inequality. Since the COVID-19 pandemic started, a significant part of women conducted business from their homes. Providing women with digital literacy and better connectivity is necessary to ensure their businesses can carry on and thrive.  

Finally, invisible barriers and ingrained cultural beliefs still hinder women from participating fully in the economy. Despite decades of progress closing the equality gap between men and women, about 90 percent of men and women hold some sort of bias against women. Economic bias still exists in many economies. Overall, 40 percent of men and women feel that men make better business executives and that men have more right to a job when jobs are scarce in 2020. This is part of the invisible barriers that women face in achieving equality. Measuring those barriers and quantifying the various sides of the equality gap help design better policies and provide a level playing field for all.