For those of us with an entrepreneurial spirit, the path to success often seems challenging but achievable. Now, imagine navigating that path as a woman with a groundbreaking idea in a developing country. Overcoming political hurdles and cultural norms presents unique challenges. In this article, we delve into the impact of formal and informal institutions on supporting women entrepreneurs in developing nations, exploring the question of:
Why do most women in developing countries still face additional barriers?
In many "developed" countries, we might assume that gender equality is the norm, considering achievements like universal education, voting rights, and inclusive parental leave policies. However, the stark reality is that the gap between developed, emerging, and developing nations is most apparent in areas related to inclusive entrepreneurship. This term encompasses initiatives ensuring equal opportunities for all in starting and managing independent activities, addressing the economically marginalized, including women.
Let's have a look at some numbers
Surprisingly, in 2023, 101 out of 190 studied countries still legally bind women to business conditions identical to men's, lacking laws preventing or penalizing gender discrimination. Women face limitations in opening bank accounts, accessing credit, registering businesses, and even signing contracts. This scenario is exacerbated by limited rights and familial responsibilities, often requiring permission from husbands.
Globally, there is an evident gender gap in entrepreneurship, with approximately 3/4 of new business owners and directors being men, regardless of a country's development level. Even in exceptions like the Philippines and Jamaica, where female ownership slightly exceeds 50%, it often pertains to small, high-risk, low-profit ventures.
The most significant disparities emerge in Global Southern economies, with 83% in Africa, 72% in East Asia and the Pacific, and 65% in Latin America facing substantial challenges in achieving entrepreneurial equality. Within the 37% of African women with bank accounts, only 5% secure loans, often due to perceived low creditworthiness. Countries like Togo, Nepal, and Afghanistan struggle, with fewer than 20%, approximately 15%, and less than 5% of female owners, respectively.
Why do we witness a considerable number of women actively participating in entrepreneurship, particularly in countries where institutional support is exceptionally weak?
Thriving against the odds
In fact, countries with lower economic status show the highest levels of entrepreneurial intent, with almost 30% of women expressing their desire to start a business. Concretely, in Afghanistan (2006), 75% of credit borrowers were women aiming to initiate their entrepreneurial ventures.
If we analyze Kenya, a country with a deeply rooted entrepreneurial culture that has experienced a surge in recent years, especially with a liberal policy encouraging business establishment while simultaneously lacking effective support from the government, the nation still discriminates against women by 50%. Despite having a thriving entrepreneurial environment, no law prohibits gender-based credit discrimination, and a woman cannot register a business as easily as a man. However, even in this challenging context, the number of women entrepreneurs remains substantial.
Kenya is not an isolated case. Observing neighbouring countries like Benin, Guinea, or Rwanda, their rate of female entrepreneurs has also increased by approximately 10% in six years. Actually, while in 2021 female entrepreneurs in Europe accounted for 5.7%, they represented 26% of the African population, putting the continent at the forefront of female entrepreneurship.
Moreover, when looking at Sub-Saharan Africa which, along with South Asia, accounts for the majority of developing economies, 24% of working-age African women see entrepreneurship as the most direct path to dignified advancement in the formal - but inaccessible - job market. As a result, these women contribute to nearly 13% of the continent's GDP.
Discovering a paradoxical scenario
Considering these figures alongside the fact that women continue to face a lack of institutional support and gender discrimination remains prevalent in most countries, the statistics present a paradoxical scenario. Despite ongoing struggles with unequal rights, the global surge in female entrepreneurs contradicts this status quo. Women are evidently motivated to embark on entrepreneurial journeys, even in less favourable conditions.
Hence, the pivotal question arises: What are the motivating factors and triggers that drive women to initiate their own businesses in different countries, especially in Africa?
We will explore this question in our next upcoming articles.
So, stay tuned!
Alisa & Kanto
Feature photo taken from Sylvia Jemutai for Nampelka