e have less than a decade left to achieve the United Nations Sustainable Development Goals (SDGs). Gender equality is one of the ambitious goals. It would be shortsighted to think of women as mere beneficiaries of the SDGs. All over the world, women entrepreneurs are running positive impact businesses that are also financially viable and effecting change far beyond their immediate context.
Members of the Cartier Women’s Initiative community are a prime example. In Nigeria, Funkola Odeleye’s legal and business support service for entrepreneurs—DIYLaw—has created more than 125,000 jobs over five years. In the Philippines, Carmina Bayombong’s student loan service InvestEd offers economic mobility to students. Some 81% of its beneficiaries have climbed up the socioeconomic ladder after their first paycheck. These are just two examples drawn from a global community of successful businesses that not only have a measurable social and environmental impact locally, but also make a sizable contribution globally.
Women-led initiatives now make up a large proportion of the entrepreneurial ventures driving job creation, innovation, and economic growth. According to the Global Entrepreneurship Monitor (GEM) 2020/2021 Women’s Entrepreneurship Report, one in every three growth-oriented entrepreneurs is a woman.
However, women entrepreneurs continue to contend with persistent challenges. All over the world, women still find it more difficult to convert their intentions into profitable businesses, largely because they lack access to networks, finance, and role models. For instance, according to GEM data, less than 50% of women entrepreneurs report knowing another entrepreneur. Women also report 20% lower confidence than men in their capabilities to start a business.
Ecosystem enablers: Adopt a sector-specific approach and shift focus to high-growth, high-impact ventures.
In the past, entrepreneurship support was typically focused on getting more women to start businesses. There are two limitations to this approach. First, this approach does not address the fact that women are overrepresented in the smallest businesses and in industries characterized by small firms and low profit margins. It would be more effective to target specific sectors and help women thrive in currently male-dominated fields such as Information and Communication Technologies (ICT), where investment is high. There is considerable scope for tech incubators and accelerators to focus more on inclusion to ensure that women, too, can create and sustain companies with lasting impact in the field.
The second limitation relates to “necessity entrepreneurship”, meaning the tendency to create a small business to survive, simply because there are no social safety nets or other options. Indeed, the potential for entrepreneurship to lift families out of poverty is undeniable. Over half of women in the developing world see it as a pathway to a better future. But women cite “job scarcity” more often than men as a reason for choosing entrepreneurship. Women entrepreneurs in general also tend to be poorer, less educated and from lower income households, and their ventures can too often end up being a means of mere subsistence, particularly in the developing world. That is why encouraging women to start businesses in high numbers needs to be coupled with both a sector-specific approach, and at the same time greater support as they scale sustainable ventures.
Policymakers: Bridge the gap that disproportionately affected women during the pandemic.
Women entrepreneurs around the world were severely disrupted by the pandemic, which brought to light just how heavily the triple burden of smaller business size, vulnerable sectors and higher family demands can weigh on women. In our survey, women were 20% more likely to report business closure due to the pandemic than men.
The pandemic also affected the internationalization gap, which has increased by 30% since 2019. Pre-pandemic, women were already more likely to target their business offerings to a local rather than national or international market. Given their propensity to work in the food and retail services sector, and their additional responsibilities in the household, it is perhaps unsurprising that this gap increased during the global pandemic in 2020.
Nevertheless, women showed great ingenuity and resilience in the face of the pandemic. They seized new opportunities and tailored their offering to the new business context. For instance, Ana-Lucia Cepeda runs Bolsa Rosa, an online job board based out of Mexico that connects women with flextime jobs. As remote work became the norm during global lockdowns, she used the opportunity to expand her company’s digital flextime offering. In Ghana, Salma Abdulai’s agri-business AMAATI almost came to a standstill during the crisis. In response, she developed supply chain software and an e-commerce platform to sell produce and saw business gradually pick up again.
Despite numerous success stories, the experience of women entrepreneurs during the pandemic shows that there is still a policy gap in creating an enabling environment for women’s entrepreneurship and providing support with family care, school, and small business impacts. Even beyond the pandemic, policy can greatly influence whether women choose entrepreneurship, and what kind of entrepreneurship they choose. For instance, in Europe, while rates of women entrepreneurship stand at 5.7%, far lower than the global average of 11%, the rate of women entrepreneurs in ICTs is exceptionally high. This could be because Europe has a well-developed welfare state system, and “necessity entrepreneurship” is less the norm.
Investors and ecosystem enablers: Promote informal networks, gender-lens investment and impact investment to help women access funding.
Access to funding has been a perennial challenge for women entrepreneurs, and the data shows that it needs to remain a priority going forward. While studies have shown that women are more likely to fund other women, they remain woefully underrepresented as institutional investors. However, women now account for 40% of active informal investors in the world, essentially supporting the ventures of friends and family. Helping create and sustain women’s business angel networks going forward - of individuals willing to invest time and money in small, newly founded companies with innovative projects - will help women invest in the products and businesses that they value.
There are a couple of other trends to monitor in the investment space. Gender-lens investment (GLI), or the practice of intentionally investing in women, is gaining traction. Although it still accounts for a small part of total investment, and is a very heterogeneous sector, the number of GLI funds has been growing in recent years, and investors are recognizing that there is a business case for investing in women.
Impact investing is another promising trend that is particularly relevant to women social entrepreneurs, as investment decisions are based on social and environmental impact alongside financial returns. Women are also taking the lead within impact investing, with a growing number of women leading impact units at top financial firms. This is good news - it means that investment in women-led impact businesses is also likely to increase as a result.
All in all, these are exciting times for women’s entrepreneurship, and ecosystem enablers have an opportunity to lift women entrepreneurs to new heights. But we need to tread intentionally: progress towards the global goals suffered serious setbacks during the pandemic, and the type of support we extend to women impact entrepreneurs could have significant impact on our collective ability to create a sustainable and equitable world for all.
The potential of women entrepreneurs to trigger a ripple effect of positive change is immense. Are we ready to support this tide of positive change effectively? It will entail supporting already-sustainable ventures, designing inclusive programs in male-dominated sectors, and promoting policy and investment practices that directly benefit women business owners. Let’s make it happen!
Editor’s Note: You can access the GEM 2020/2021 Women’s Entrepreneurship Report at the following link.
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The Women’s Entrepreneurship Landscape is Changing. Is the Ecosystem Ready to Adapt?
Illustration via Adobe Stock.
March 8, 2022
Women-led initiatives make up a large proportion of the entrepreneurial ventures driving job creation, innovation, and economic growth. Yet women still face access barriers to networks, finance, and role models they need to run profitable businesses, write Aileen Ionescu-Somers and Wingee Sampaio.
W
e have less than a decade left to achieve the United Nations Sustainable Development Goals (SDGs). Gender equality is one of the ambitious goals. It would be shortsighted to think of women as mere beneficiaries of the SDGs. All over the world, women entrepreneurs are running positive impact businesses that are also financially viable and effecting change far beyond their immediate context.
Members of the Cartier Women’s Initiative community are a prime example. In Nigeria, Funkola Odeleye’s legal and business support service for entrepreneurs—DIYLaw—has created more than 125,000 jobs over five years. In the Philippines, Carmina Bayombong’s student loan service InvestEd offers economic mobility to students. Some 81% of its beneficiaries have climbed up the socioeconomic ladder after their first paycheck. These are just two examples drawn from a global community of successful businesses that not only have a measurable social and environmental impact locally, but also make a sizable contribution globally.
Women-led initiatives now make up a large proportion of the entrepreneurial ventures driving job creation, innovation, and economic growth. According to the Global Entrepreneurship Monitor (GEM) 2020/2021 Women’s Entrepreneurship Report, one in every three growth-oriented entrepreneurs is a woman.
However, women entrepreneurs continue to contend with persistent challenges. All over the world, women still find it more difficult to convert their intentions into profitable businesses, largely because they lack access to networks, finance, and role models. For instance, according to GEM data, less than 50% of women entrepreneurs report knowing another entrepreneur. Women also report 20% lower confidence than men in their capabilities to start a business.
Ecosystem enablers: Adopt a sector-specific approach and shift focus to high-growth, high-impact ventures.
In the past, entrepreneurship support was typically focused on getting more women to start businesses. There are two limitations to this approach. First, this approach does not address the fact that women are overrepresented in the smallest businesses and in industries characterized by small firms and low profit margins. It would be more effective to target specific sectors and help women thrive in currently male-dominated fields such as Information and Communication Technologies (ICT), where investment is high. There is considerable scope for tech incubators and accelerators to focus more on inclusion to ensure that women, too, can create and sustain companies with lasting impact in the field.
The second limitation relates to “necessity entrepreneurship”, meaning the tendency to create a small business to survive, simply because there are no social safety nets or other options. Indeed, the potential for entrepreneurship to lift families out of poverty is undeniable. Over half of women in the developing world see it as a pathway to a better future. But women cite “job scarcity” more often than men as a reason for choosing entrepreneurship. Women entrepreneurs in general also tend to be poorer, less educated and from lower income households, and their ventures can too often end up being a means of mere subsistence, particularly in the developing world. That is why encouraging women to start businesses in high numbers needs to be coupled with both a sector-specific approach, and at the same time greater support as they scale sustainable ventures.
Policymakers: Bridge the gap that disproportionately affected women during the pandemic.
Women entrepreneurs around the world were severely disrupted by the pandemic, which brought to light just how heavily the triple burden of smaller business size, vulnerable sectors and higher family demands can weigh on women. In our survey, women were 20% more likely to report business closure due to the pandemic than men.
The pandemic also affected the internationalization gap, which has increased by 30% since 2019. Pre-pandemic, women were already more likely to target their business offerings to a local rather than national or international market. Given their propensity to work in the food and retail services sector, and their additional responsibilities in the household, it is perhaps unsurprising that this gap increased during the global pandemic in 2020.
Nevertheless, women showed great ingenuity and resilience in the face of the pandemic. They seized new opportunities and tailored their offering to the new business context. For instance, Ana-Lucia Cepeda runs Bolsa Rosa, an online job board based out of Mexico that connects women with flextime jobs. As remote work became the norm during global lockdowns, she used the opportunity to expand her company’s digital flextime offering. In Ghana, Salma Abdulai’s agri-business AMAATI almost came to a standstill during the crisis. In response, she developed supply chain software and an e-commerce platform to sell produce and saw business gradually pick up again.
Despite numerous success stories, the experience of women entrepreneurs during the pandemic shows that there is still a policy gap in creating an enabling environment for women’s entrepreneurship and providing support with family care, school, and small business impacts. Even beyond the pandemic, policy can greatly influence whether women choose entrepreneurship, and what kind of entrepreneurship they choose. For instance, in Europe, while rates of women entrepreneurship stand at 5.7%, far lower than the global average of 11%, the rate of women entrepreneurs in ICTs is exceptionally high. This could be because Europe has a well-developed welfare state system, and “necessity entrepreneurship” is less the norm.
Investors and ecosystem enablers: Promote informal networks, gender-lens investment and impact investment to help women access funding.
Access to funding has been a perennial challenge for women entrepreneurs, and the data shows that it needs to remain a priority going forward. While studies have shown that women are more likely to fund other women, they remain woefully underrepresented as institutional investors. However, women now account for 40% of active informal investors in the world, essentially supporting the ventures of friends and family. Helping create and sustain women’s business angel networks going forward - of individuals willing to invest time and money in small, newly founded companies with innovative projects - will help women invest in the products and businesses that they value.
There are a couple of other trends to monitor in the investment space. Gender-lens investment (GLI), or the practice of intentionally investing in women, is gaining traction. Although it still accounts for a small part of total investment, and is a very heterogeneous sector, the number of GLI funds has been growing in recent years, and investors are recognizing that there is a business case for investing in women.
Impact investing is another promising trend that is particularly relevant to women social entrepreneurs, as investment decisions are based on social and environmental impact alongside financial returns. Women are also taking the lead within impact investing, with a growing number of women leading impact units at top financial firms. This is good news - it means that investment in women-led impact businesses is also likely to increase as a result.
All in all, these are exciting times for women’s entrepreneurship, and ecosystem enablers have an opportunity to lift women entrepreneurs to new heights. But we need to tread intentionally: progress towards the global goals suffered serious setbacks during the pandemic, and the type of support we extend to women impact entrepreneurs could have significant impact on our collective ability to create a sustainable and equitable world for all.
The potential of women entrepreneurs to trigger a ripple effect of positive change is immense. Are we ready to support this tide of positive change effectively? It will entail supporting already-sustainable ventures, designing inclusive programs in male-dominated sectors, and promoting policy and investment practices that directly benefit women business owners. Let’s make it happen!
Editor’s Note: You can access the GEM 2020/2021 Women’s Entrepreneurship Report at the following link.
