Many women across the developing world face near-insurmountable barriers to starting and growing their own business.
Some 70% of women-owned small and medium enterprises (SMEs) in developing countries are shut out of financial institutions or can’t get the capital they require. Female-owned businesses need $1.5 trillion more than they can access. Globally, fewer than one in three SMEs are owned and run by women.
Importantly, many of the setbacks women face go beyond simple financing, and range from access to markets and technology to legal discrimination. The World Bank is aiming to address all these issues with its new Women Entrepreneurs Finance Initiative (We-Fi), which hopes to raise more than $1 billion for the cause.
The idea is not to directly give money to individual women entrepreneurs, but to fund projects that disrupt the unequal gender systems that create financial obstacles in the first place. Priya Basu, the senior World Bank economist heading the program, called this an “ecosystem approach”, and said that while bids for funding submitted between October and March were still being considered, several key themes were emerging.
The scale of the challenge
One critical reason female entrepreneurs in the developing world struggle with financing is that women are much less likely to own property or have rights to land, yet these are the fixed assets that banks often require as collateral against loans. “There’s lots of interesting proposals on helping banks and other financial institutions assess prospective women-owned SMEs as clients, looking at alternative ways of assessing collateral, because traditional approaches may not work in women’s favour,” said Basu.
Some of the proposed projects aim to provide technical support to these financial institutions so they can accept alternative indicators of credit-worthiness, such as movable assets like machinery, equipment, livestock, or crops. Other schemes propose ways to officially document these assets, such as through movable asset registries.
Meanwhile, women entrepreneurs can struggle to get a slice of big companies’ procurement budgets — less than 1% of spending by large firms on suppliers is earned by women-owned businesses. This is partly because women don’t have the money to grow their businesses, but also because they tend to have less social capital and so face difficulties establishing robust networks and connections.
Basu said that other projects the We-Fi will fund include some aimed at helping women enter large firms’ supply chains. These focus in particular, she said, on “the capacity-building support needed for women to submit proposals to win procurement bids, and to then keep up with the standards needed to stay in that supply chain.”
Then there is the need to address a gender gap in access to technology — especially helping women to use mobile platforms so they can more easily market their product or get online financing. Poor women in developing cities are 50% less likely to be connected to the internet than men, hindering their chances of growing successful businesses.
No project that focuses solely on economic issues can hope to entirely correct the gender gap in entrepreneurship. Women in many developing countries also face a host of structural and cultural hurdles — the result of ingrained social norms around gender. For example, women everywhere have less time to spend taking care of a business because they spend more time doing unpaid work at home and taking care of families than men.
And, in many cases, women also suffer from legal discrimination. A recent World Bank report shows that over a third of economies legally restrict women’s agency and freedom of movement in at least one area. In 18 economies, women can’t get a job or pursue a trade or profession without permission from their husbands.
“The barriers these women face across the developing world are tied to deep-rooted cultural biases, and a range of issues beyond,” Basu conceded.
“But a key point to make is that at the World Bank we’re tackling these alongside the economic barriers,” she added. “And none of the projects proposed takes an isolated approach — all of them look at the ecosystem of challenges faced by women, including policy and regulatory barriers.”
So far, We-Fi has raised about $340million from 14 governments, spearheaded by the US and Germany under Angela Merkel’s G20 leadership. The aim is to source the rest from the private sector, and all projects proposed have to demonstrate that they can leverage each dollar of grant money with four or five dollars of private sector resources.
(Picture credit: UN Women)