Why the World needs Women Entrepreneurs

– by Stella Mally –

Women entrepreneurship matters

MarblesAccording to the dictionary an “entrepreneur” is a person who sets up a business or businesses, taking on financial risks in the hope of profit.

By reading this definition we would think that for the entrepreneurial condition it doesn’t matter if this person is a man or a woman. And in fact there is a common rationale. But still there is the need for talking about “women entrepreneurship” as specificity, because the preconditions might be different depending on the person’s gender.

Women entrepreneurship needs to be addressed separately for two main reasons, clearly identified by the OECD in its work about entrepreneurship promotion. The first reason is that, despite lower participation rates in entrepreneurship than men, women entrepreneurs are an important untapped source of economic growth. They create new jobs for themselves and others. And by being different they also provide society with different solutions to management, organisation and business problems as well as to the exploitation of entrepreneurial opportunities. But this added value is not very much promoted (few awareness of the role of women entrepreneurs in the economy).

The second reason is that the topic of women entrepreneurship has been largely neglected both in society in general and in the social sciences. Women generally choose to start and manage firms in industries (primarily retail, education and other service industries) which are often perceived as being less important to economic development and growth than high technology and manufacturing. Furthermore and in part motivated by the above, mainstream research, policies and programmes often do not take into account the specific needs of women entrepreneurs. Women are faced with specific obstacles that have to be overcome in order to give them access to the same opportunities as men.

If we further analyze this market failure discriminating against women’s possibility to become entrepreneurs and their possibility to become successful entrepreneurs we find 5 main obstacles:

  • Lack of experience. All stages in entrepreneurship for both men and women depend on previous education and work experiences and the related ability to discover and exploit opportunities. While this ability might be high among educated and skilled women, the incentives for doing so seem to be small as highly educated women usually choose other career options than entrepreneurship, especially at the beginning of their careers. The majority of unskilled or less skilled women entrepreneurs lack the ability to prepare their companies for survival and growth.
  • Lack of role models. Role models are directly related to the number of emerging entrepreneurs and their influence is gender related (generally our choices tend to be more influenced by persons of the same sex). By having less women entrepreneurs than men there are automatically less successful women entrepreneurs than men and therefore less close and impacting role models for aspiring women entrepreneurs.
  • Lack of capital. Women’s position in society has led to a lack of financial assets which are a prerequisite for starting a firm. Family commitments (limitations to work on a full time basis and to engage in a career) and an existing gender pay gap increase women’s obstacles in generating incomes. Women’s legal position and rights to property are also directly influencing their entrepreneurial possibilities. And if women have less (or no) access to capital they will also opt for opportunities with less growth potential. Furthermore, most investors will only invest if the entrepreneur can match the investment with their own resources (or collaterals). Finally, also gender stereotypes (women are not viewed as entrepreneurs) and women entrepreneurs’ choice about the industry in which they are going to operate might influence financial institutions in their decision of credit availability.
  • Lack of time. Very related to the mentioned domestic and childcare responsibilities it is stated that women do not have enough free time to develop their entrepreneurial skills or to develop an existing business. Less time for meeting potential supporters/investors, accessing specific training or seeking for better customers or suppliers are clear burdens for women’s entrepreneurial development.
  • Lack of relevant networks. Women are less present in professional networks that can guarantee them access to critical resources (also finance), support and information. Networks also strengthen the sense of self-confidence.

A natural solution for changing this situation is therefore a mixture of different policies and a change of attitudes. Affordable child care and equal treatment in the work place have to be guaranteed so to eliminate the labour force participation barrier. Women’s entrepreneurial dimension has to be further studied so to provide tailored solutions to specific needs and the impact of existing policies has to be duly evaluated. Women entrepreneur and businesswomen networks, preferably incorporated within major and gender neutral business support organisations, have to be promoted as nascent businesses need support to flourish. And also it is crucial to educate society about the value of women’s entrepreneurship: informing women themselves about the potential benefits of entrepreneurship (starting with young women) and informing the market of the value and importance of women entrepreneurship.

According to the IFC it is estimated that globally there are at about 9.34 formal million women-owned SMEs, which is approximately one third of all formal SMEs. The Global Entrepreneurship Monitor states that there are some 126m women operating new businesses. Yet we face a huge equality gap as mentioned before. In only six economies (Vietnam, Philippines, Thailand, Malaysia, Peru and Indonesia) women show equal or higher entrepreneurship rates than men. In the EU, even though there are more women than men, female entrepreneurs represent only a third of the self-employed.

The good news is that now there are a variety of documented successful approaches to promote women’s equal opportunities in business and increasing examples of women entrepreneurs that have created highly successful firms. Several women-owned enterprises are well-positioned to enhance national prosperity and to contribute to economic growth and a better future. Especially, because women usually reinvest a much higher part of their earnings in their families and communities than men (in emerging markets, women reinvest 90% of their earnings in their families and communities), spreading wealth and creating a positive impact on future development.

A 2009 report already noted: “gender equality fuels growth, by bringing women into the labor force and by raising women entrepreneurs the overall level of human capital, productivity and wages.” In fact, the former World Bank Group President Robert Zoellick has famously described gender equality as “smart economics.”

A vital push is needed to make women’s enterprises an unstoppable force for positive transformation.


SMally (2)

Stella Mally is a lawyer and gender expert, currently working as project coordinator at the Association of Organisations of Mediterranean Businesswomen (AFAEMME) where she is especially involved in promoting entrepreneurship among young women.

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