Overarching Horizontal Themes
Social norms influence the formation, operation, and performance of women-owned businesses. They also affect access to and content of education, domestic tasks, child and elder care, permissible economic activities, and interactions with buyers and suppliers. All of these influences impact both women ́s ability to conduct business and their self-perception, confidence, and ambition with regard to income-generating activities. Furthermore, male dominance and decision-making often limit women’s ability to control the revenue generated by their businesses (Simavi, Manuel, and Blackden 2010) and their authority to allocate household assets. When women do earn income, they face added pressure to share their resources with family members.
These underlying social norms directly impact the sectors of operations and business growth options women choose as well as their willingness and ability to invest in their businesses. In addition, social norms may limit women’s mobility and their access to and participation in informal communication networks, training, and critical financing. Social constraints also limit women's political engagement and leadership opportunities, which is critical to informing policy decisions about issues affecting women and their businesses (World Bank Group 2017a). In such environments, women overwhelmingly enter “safer,” socially acceptable sectors that offer fewer growth opportunities, have less capital and assets, and are more likely to operate in the informal market (World Bank Group 2019b).
The Business Climate
The aggregate result of discriminatory social norms is that the overarching business climate for women is more challenging than that for men. Thus women-led firms tend to concentrate in low-productivity, low-technology, low-growth sectors, such as hospitality, services, wholesale and retail trade, garments, textiles, and leather goods. Women-owned firms are more likely to be home-based and to have fewer employees, lower average sales, and less value-added than firms owned by men (World Bank Group 2019b). All of these factors contribute to lags in performance: women-led firms show lower returns to capital and lower profitability (Cirera and Qasim 2014).
Female Labor-Force Participation
A foundational understanding of the broader landscape of female labor-force participation provides both context and insights into the state of female entrepreneurship, the industries in which women cluster, why women decide to pursue or pass up entrepreneurial opportunities, and whether these business endeavors succeed.
The global female labor-force participation rate is higher today than it was three decades ago (Ortiz-Ospina and Tzvetkova 2017), but on average, little recent improvement has been made globally, even though advances have occurred in female economic participation in some countries.
Furthermore, women tend to be underrepresented in leadership and management positions and overrepresented in jobs of lower quality and informal and vulnerable economic activities, including self-employment in unregistered businesses with no bookkeeping practices and tax payments (ILO 2018). In addition, restrictive labor practices, along with women’s typically lower wages, longer life spans as compared with men, and shorter work lives due to maternity, child, and elder care duties place women at greater risk of facing poverty in old age.
The factors that constrain women’s labor force participation include sectors and time of day, such as nocturnal shifts, during which women are prohibited from working; lack of legal provisions regarding part-time work; and limited or nonexistent government support for or provision of childcare services. These factors also limit the number of women who become business managers and leaders. Often, women’s employment decisions reflect the interplay among prevailing gender and social norms associated with education and occupational choices, household and family responsibilities, mobility constraints, and access to labor markets.
Women’s engagement in entrepreneurship is crucial to improving their economic status. Female entrepreneurs not only benefit from having a source of income, but they are also more likely to hire more female employees than do male entrepreneurs (Cirera and Qasim 2014). Women invest a higher percentage of their entrepreneurship and employment earnings in their households, thereby increasing overall amounts spent on education and health. Female entrepreneurship is also a viable economic and livelihood solution for older women in countries with an earlier mandatory retirement age for women, thus potentially helping to reduce the likelihood of poverty in old age.
Owning and operating a business can be particularly attractive in economies where social and legal restrictions as well as a lack of alternative employment opportunities limit women’s options. Multiple constraints discourage both women and men from becoming entrepreneurs and starting firms, including time and number of procedures necessary to start a business, cost as a percentage of income to start a business, and government resources available to entrepreneurs.
While both sexes face these constraints, they typically lead to worse outcomes for women’s entrepreneurial activity than for men’s. It is also noteworthy that as economic development and educational levels in a country increase, entrepreneurial participation among women declines while business closure decreases (Global Entrepreneurship Monitor 2017). This means that, given the option, women tend to seek out employment rather than start businesses. When they do pursue entrepreneurial activity, however, their businesses are less likely to fail than those of men. The gender-specific constraints that women entrepreneurs face worldwide affect how they manage their businesses relative to men and inhibit business productivity and growth. By removing or significantly reducing barriers to female entrepreneurship, not only do women’s individual autonomy and economic and social well-being increase, but broader benefits accrue to the economy.
Significant advances made in recent years to connect the poor to technology mean that more women are able to access technology and use it to overcome key constraints to starting and growing their businesses. Technology can be used to ease barriers arising from social norms by enabling communication and interaction without open violation of societal expectations. It can increase women’s access to market information, enable women to work more flexible hours, and increase their possibilities for working remotely. Training, savings programs, networks of peers, and communication with mentors or role models through social media or other Internet platforms can thus become available, helping to overcome the limited geographical reach of program implementers and the time constraints on female entrepreneurs.
Digital tools can help make business formalization and growth more accessible and can facilitate women’s input into legal and regulatory reforms, their access to finance and credit tools, their entry into new markets, and their acquisition of skills and development of business acumen.
Digitalization can make it easier for female entrepreneurs to comply with legal and regulatory requirements through electronic transactions allowing them to obtain an ID, register a business, or obtain a license without having to visit a government office. Effectively deployed, technology can also contribute to less discriminatory, more standardized processes and can help provide workable approaches to overcoming some of the restrictions that women face.
Furthermore, through online platforms and e-government feedback mechanisms, women’s voices can be heard when laws and regulations are formulated and implemented. Digitalization has increased women’s access to financial services in recent years. Digital financial services have bridged the gender gap in account ownership and access to credit by decreasing the cost of access to financial services and by bypassing social norms and mobility constraints. Innovations in digital technology can also help address skills and information gaps for women. The use of digital technology in programs to improve women’s business acumen and technical skills reduces cost barriers to program delivery and helps reach women who are unable to attend extensive in-class trainings or who face logistical challenges in accessing support programs.
Finally, technology permits more small-scale entrepreneurs to participate in markets, and it provides closer links between buyers and sellers through innovations in logistics chains. Mobile phones in rural areas provide entrepreneurs, including women, access to markets, enabling them to carry out financial transactions, including arrangements for sale and delivery of goods and services. Virtual marketplaces (VMPs) or e-commerce platforms make novel contributions in this area. VMPs also have the potential to lower trade barriers for women business owners by bringing female producers and traders closer to markets and making it easier for female entrepreneurs to borrow (World Bank Group and World Trade Organization 2020). Technology does have its limitations, including access, ownership, and use among women. Others include the high cost of equipment; security concerns over user location, communication logs, and breaches of personal data; and women’s lower technical literacy and confidence. Working with technology can require costly investments and a great deal of technical proficiency. Increased use of technology may go along with fraudulent schemes and online harassment. When deploying technology, it is therefore important to understand the full range and magnitude of the potential risks and to plan for carefully managing those risks.
Appendix 1 provides more detailed background and potential technology solutions by theme and constraint. It also includes Box 4: Limitations of Technology, which discusses disadvantages of technology that can make implementation expensive or risky. Use of technology creates its own criminal opportunities. Because technology transforms how people communicate and conduct business faster than legal and regulatory frameworks can evolve to address those changes, privacy, security, and individual rights will continue to be central concerns.