Nine Factors Holding Back Women’s Business Performance in Africa

Female entrepreneurs

Open air market I Pexels @brett-sayles

Female entrepreneurs do not make business decisions in a vacuum. Rather, their business decisions differ systematically from those of male entrepreneurs because they are constrained by factors in a way that men are not. World Bank’s Profiting from Parity- Unlocking the Potential of Women’s Businesses in Africa report presents nine underlying constraints and explores the evidence on why the factor matters and the extent to which it contributes to the gap in business performance.

Contextual factors

Legal discrimination: Female entrepreneurs cannot have equal economic opportunity if a country’s laws restrict a woman’s ability to own and run a business. Women often face barriers from customary law.

In addition, formal laws still do not ensure a level playing field. Although many African countries have made progress in removing legal barriers – including laws that deny women the same rights as men to register a business, sign a contract, open a bank account, or own and inherit property – only three African countries have formal laws that prohibit gender discrimination.

Social Norms: Social norms exert strong influence over the strategic choices that female entrepreneurs make and can constrain their ability to grow their businesses.

They can shape how women view themselves, perceive their abilities, impact their aspirations and can lead to discriminatory treatment by others. Because social norms in many African countries do not align with a woman striving for business growth, women’s choices are limited. Women who contradict social norms may also face retaliation.

Risk of gender-based violence: Widespread gender-based violence (GBV) likely takes a toll on women’s health and well-being, which hinders their ability to run their businesses effectively. Working outside of the home may put women at risk, while some women may view self-employment as a way to avoid sexual harassment at the workplace.

Endowments

Education and skills gaps: While most African countries have achieved gender parity in access to primary education, a persistent gap in educational and skill attainment between male and female entrepreneurs – particularly at the secondary level and beyond – may help explain gender differences in strategic business decisions.

Evidence points to gaps between male and female entrepreneurs in three areas: formal education, management skills, and socio-emotional skills. This report finds that self-employed women have overall completed fewer years of education than self-employed men.

Male entrepreneurs often have higher technical skills; sometimes have higher financial literacy; and are sometimes more likely to participate in training or offer training.

Confidence and risk preferences: Women business owners in Africa frequently show less confidence than their male counterparts.

Among entrepreneurs in Ghana, women are 14% less likely than men to think they would make a good leader. Female entrepreneurs demonstrate less confidence in their abilities, which may make them less willing to compete (and win) – especially in stereotypically male domains. Women’s lack of confidence relative to men could be related to risk aversion, but analysis for this report do not show a clear pattern on this issue.

Finance and assets: Female entrepreneurs continue to control fewer assets than men, affecting their capacity to invest in their business and access large enough loans.

While the gender gap in obtaining loans from financial institutions is smaller in Africa than in any other region of the world, this report’s analysis shows consistent and large gender gaps in the size of the loans outstanding for various target groups of entrepreneurs in Africa.  

Access to networks and information: Women often do not have the same access as men to large and diverse social networks that can support the growth and competitiveness of their business.

Both men’s and women’s networks are largely segregated by gender. Women’s networks command fewer resources than men’s and include more “strong” family and kin relationships that are less valuable than new connections in creating business opportunities.

READ:

Household-level constraints

Household allocation of productive resources: Women often lack authority over the allocation of household assets and may face more pressure to share resources, which restricts both their willingness and ability to invest in their businesses.

Women’s lack of control over the allocation of household resources may be a source of inefficiency if it means that assets are invested in male-supported enterprises irrespective of managerial ability or the value of the business opportunity.

Research shows that female entrepreneurs struggle to direct capital to their business, which can be a function of either their own or others’ needs. Inefficiency in intra-household allocation is compounded when female entrepreneurs are compelled to share resources derived from social connections outside of the home.

Time constraints and care: Women in Africa spend more time than men on domestic chores.

This limits the amount of time they can dedicate to their business and requires them to stay home at times of the day that are best for conducting business.

Being married increases the gender gap in time spent on the business in three countries, while the gap is lower in male-dominated sectors where women may have to work the same hours as men to participate.

Emerging evidence suggests that childcare programs may have a positive impact on women’s employment outcomes, but these studies do not analyze the impact of childcare on women’s business outcomes.

Source: World Bank new report, “Profiting from Parity: Unlocking the Potential of Women’s Businesses in Africa”, produced by the World Bank Group’s Africa Gender Innovation Lab and the Finance, Competitiveness and Innovation Global Practice, seeks to focus attention on the challenges that Africa’s women entrepreneurs face and identify practical solutions.