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Female Entrepreneurship in Developing Nations

Growth in the global economy is hard to come by – and world trade is slowing down as well. The big question: What could be new sources of growth? Could women entrepreneurs be an economic force that could provide new growth dynamics? We wonder: Which of the following statements about women in the global economy are true?

A. Women entrepreneurs face barriers to financial services.
B. Pay equity for women could spur global growth.
C. Developing nations limit women’s participation in the economy.

A. Women entrepreneurs face barriers to financial services…is true.

One key reason why women are underrepresented among entrepreneurs is that women are significantly less likely to have bank accounts and access to financial services than men.

The Washington-based International Finance Corporation estimates that the worldwide gap in financing for formal, women-owned small and medium-sized enterprises (SMEs) totals close to $300 billion.

Efforts are underway in many countries to increase women’s access to financial services. In the private sector, Barclays Bank of Kenya has set up a $50 million fund together with a program to provide financial services and business skills training for 10,000 women entrepreneurs.

The Finnish government has set specific aid targets for supporting women’s economic empowerment in developing nations. Rwanda and Chile are working to ensure that public procurement provides better opportunities for women’s businesses – something the United States has been promoting for 25 years.

Technological apps, such as SheTrades might also be able to take advantage of widespread emerging market mobile internet access to help women in business connect with each other, share experiences and conclude business deals.

B. Pay equity for women could spur global growth…is also true.

The McKinsey Global Institute has estimated that if women’s wages and labor force participation were raised to make them equal to those of men by 2025, this would boost annual global output by more than $28 trillion.

It is worth understanding the true significance of that number: This is equal to adding the annual output of a new United States and China to the world economy. Together, these two countries account for 39% of global GDP in nominal terms.

Especially in the poorest households, empowering women yields positive social and economic effects that last for generations. If given the choice, they invest much more of their income than men do in their families’ education and health.

Companies also tend to benefit from gender equality. Research shows that having more women on corporate boards and in leadership positions is associated with higher profitability.

As a result, countries where women have greater economic opportunities tend to rank higher on measures of productivity and national competitiveness.

This underscores what humans instinctively know to be true: If a team deliberately neglects, or suppresses, the talents of half of its players, that is no recipe for victory.

C. Developing nations limit women’s participation in the economy…is also true.

Given that women-owned firms tend to have more women workers, helping these businesses go global is a concrete contribution to women’s economic empowerment. But empowerment also requires legal reform.

Whether as entrepreneurs or as employees, women face widespread restrictions on their economic opportunities. In far too many countries, discriminatory laws confine women to low-paying business activities, more often than not in the informal sector.

In 18 countries, the law gives husbands the right to prohibit their wives from working outside the home.

Gender-based job restrictions tend to have real economic effects. They usually result in wider wage gaps and lower employment rates for women.

In addition, existing social and legal barriers relegate hundreds of millions of women to subordinating themselves in marginal economic roles.

Governments must do more to fix discriminatory laws. Business surveys in 20 developing countries conducted by the Geneva-based International Trade Centre indicate that only about a fifth of companies that export are owned or managed by women.

Ending the often systematic treatment of women as second-class citizens in terms of giving them basic rights of societal and economic participation is a first step to change this situation.

Editor’s note: This quiz’s analytical inputs are drawn from “#SheTrades: Global Actions to Empower Women to Trade” by Arancha González, Executive Director of the International Trade Centre.

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