Women in developing economies are much more likely to start their own businesses than those in high-income countries. About a quarter of women in low-income countries and 13% in lower-middle income countries are starting their own ventures compared to about 10% globally. If you add up the women who aspire to be entrepreneurs, over half of the women in emerging economies see entrepreneurship as a path to a better future, meriting a strong response from policymakers in creating a more favorable environment for women-led businesses.
These are among the important findings highlighted in a new research study entitled COVID-19 Impacts on Women Entrepreneurs in Emerging Economies: Insights and Indicators, authored by GEM researchers Amanda Elam of Babson College, Niels Bosma of Utrecht University and Anita Shankar of Johns Hopkins University. The paper, supported by the Women Entrepreneurs Finance Initiative (We-Fi), draws on pooled GEM data from 2014-2020 and published reports from the World Bank Enterprise Survey and the Facebook Future of Business Survey. In developing countries, women are much closer to parity with men in business startup activity with the gender gap increasing from 10% in low-income countries to 30% in high-income countries, the study notes.
The authors highlight some of the challenges facing women entrepreneurs in emerging economies who are some of the youngest, poorest and least educated entrepreneurs in the world. They are more likely to run small businesses in local markets and industry sectors most vulnerable to external shocks like the economic lockdowns and market shrinkage experienced during the COVID-19 crisis.
“Women entrepreneurs in emerging economies have experienced some of the worst pandemic impacts, including business closures and financial distress complicated by family demands and lack of access to financial relief,” said Elam. “Over half of women in developing countries consider entrepreneurship as a means of income and opportunity, double the rate in high income countries. However, women in emerging economies have a much dimmer view of business recovery and growth prospects than other women.”
While women entrepreneurs in emerging economies viewed the government response to support entrepreneurs at the start of the pandemic more favorably compared to other women around the world and all men, many of these emerging economies had not yet experienced the brunt of disease spread.
Recommendations
The findings from the report will be used to inform We-Fi’s Theory of Change which focuses on four key pillars to support women’s entrepreneurship: access to finance, access to knowledge and skills, access to markets, and the entrepreneurial ecosystem and enabling environment.
“Many women are shuttering their businesses due to the pandemic, while others may turn to entrepreneurship as they rethink their jobs and see opportunities,” said Wendy Teleki, Head of the We-Fi Secretariat. “We need to do more to support them and develop a more robust entrepreneurship ecosystem to unleash their potential.”
Based on the findings in this report, the paper highlights five key recommendations for policymakers.
- Sponsor Global Research and Data Initiatives in Emerging Economies: Overall, sex-disaggregated data on entrepreneurship in emerging economies are limited. Increasing support for these data collection efforts could improve data for more effective policy & programming.
- Launch Entrepreneurship Support Programs Focused on Network Connection and Empowerment: Mechanisms to increase connection (e.g. via networking and mentoring) and trainings that complement standard business training (e.g. on personal empowerment and leadership) can catalyze greater business growth.
- Support Digital Business Solutions for Remote Banking and Market Access: Expanding access to digital tools for women-led businesses, especially those that also link to business formalization processes, can bridge the current finance access gap.
- Introduce Sectoral Relief Policies for the Self-Employed and Small Business Owners: As many women-run businesses are concentrated in industry sectors significantly affected by the pandemic, designated relief programs aimed at those sectors and related supply chains can be an effective way to reach these women-run businesses.
- Implement Care Policies for the Self-Employed and Small Business Owners: Many female business owners must juggle between taking care of their households and keeping their businesses afloat. In addition to the wage subsidies and business relief, efforts are needed to prioritize support for schools and daycare facilities along with other groups of essential workers in mitigation and vaccination schemes.
“Women entrepreneurs are an untapped resource for economic growth in emerging economies,” said Aileen Ionescu-Somers, GEM Executive Director. “This report highlights data showing opportunities to strengthen the entrepreneurial ecosystems supporting women, even despite the negative impacts of the pandemic.”
The research was sponsored by the Women Entrepreneurs Finance Initiative (We-Fi). We-Fi was created in recognition of the critical role played by women’s entrepreneurship in empowering women, creating jobs, boosting inclusive economic growth, and ending poverty. The Initiative, established in 2017, harnesses the public and private sectors to open new doors for women entrepreneurs across the developing world. We-Fi is hosted by the World Bank and its programs are implemented by six Multilateral Development Banks and supported by 14 donor countries. We-Fi has allocated nearly $300 million to programs that are mobilizing an additional $3 billion. We-Fi is operational in 52 developing economies. More information is at https://we-fi.org.