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Profiting from parity: Addressing constraints to support women-owned businesses

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Persistence, strength, tenacity and passion are just a few ways that some of Sub-Saharan Africa’s successful business women describe the secret to their success. This isn’t surprising; in Africa, women are more likely to be working than women in other regions, and they are more likely to be entrepreneurs than men. So, it makes sense these women have a resilience and power unmatched by many others. 

Every day, we see women entrepreneurs hustling to meet their business goals and support their families. Yet, the data shows that in Africa, the performance of female-owned businesses consistently lags behind that of male-owned businesses. On average, businesses owned by men make 34% more than women-owned businesses do.

Why is that? For the past two years, the World Bank’s Africa Gender Innovation Lab and Finance, Competitiveness and Innovation Global Practice worked to find the answer to that question. Our research culminated in a flagship report, Profiting from Parity: Unlocking the Potential of Women’s Businesses in Africa. The report, which focuses on women entrepreneurs in Sub-Saharan Africa, includes extensive data analysis of new high-quality household and firm-level data to find out not only why women-owned businesses underperform, but what governments and the private sector can do to better support them.
The bottom line is female entrepreneurs do not make business decisions in a vacuum. Their decisions are impacted by many factors outside the sphere of business, and often, men do not face the same constraining factors. For example, women face time constraints based on their care obligations to their children and other family members and domestic chore responsibilities. We found that women in Uganda, Togo and Malawi, are much more likely than men to be simultaneously taking care of others while running their businesses. This limits the amount of time and energy they can dedicate to their enterprises and often leads to lower profits.

A second constraint highlighted in the report is women entrepreneurs’ control over fewer assets. While in many countries both male and female entrepreneurs are capital constrained, women entrepreneurs are a lot less likely than men to have collateral which inhibits them from accessing large enough loans. For example, in Uganda women receive 40% the total amount of credit that men receive.  This inability to access large enough loans, limits women entrepreneur’s ability to make business investments and again often leads to lower profits.
The report provides a framework with seven additional gender-specific factors that hold back African women’s business performance. This framework offers structure when thinking about the obstacle’s women face and how to come up with comprehensive solutions to better support them. We are particularly excited about the deep-dive analysis included in the report on three factors: social norms, networks and household-level constraints, three areas that have limited evidence to date.  Finally, the report offers policymakers solutions grounded in research on designing programs and policies to improve the performance of female entrepreneurs.
To better highlight the decision-making process and support that has allowed female entrepreneurs to succeed, we felt we needed to complement our analysis with stories from the entrepreneurs themselves – their journeys to success, difficulties they’ve faced and support they have received. This blog is the first in a series featuring African women entrepreneurs from across industries, sub-regions and experience levels. Their voices and the Profiting from Parity report findings are a call to decision makers to act now to eliminate the gender gap in business performance.
Stay tuned to learn more about these inspiring women’s journeys to entrepreneurial success and evidence-based guidance on designing programs and policies to expand opportunities for female entrepreneurs in the report.

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