These factors include low education levels, limited access to finance, lack of opportunities, and strong patriarchal structures that limit women's participation in decision-making. With limited capital and limited education, women will tend to opt to start a business that requires low income, low input, and is less technical such as a food kiosk, or businesses that involve manual labour.
Necessity and not opportunity is the biggest driver for them to engage in these low profitability sectors. In comparison, opportunity-driven entrepreneurs are more likely to operate in profitable sectors with opportunities to scale. Caren Grown, the World Bank director for gender, says women are rarely in mining, construction, electronics, and software, which are all high-growth, high profitability sectors. Grown says that this centres women in low-earning and domestically focused sectors with low economic and business growth prospects, explaining the gender earnings gap.
A new report by the UN Economic Commission for Africa (ECA) shows that education is a critical factor for productive female entrepreneurship in Africa. The 'Women's Entrepreneurship Report: Education and Finance for Successful Entrepreneurship in Africa' report released in January this year relies on data from thousands of African entrepreneurs and SMEs to establish links between education, access to finance, and improved productivity.
The report says that women with high education levels are likely to start an opportunity-driven business. In contrast, those with primary education or less are more likely to start a business out of necessity. Also, women with higher education levels are more likely to save for business and have a bank account. It goes without saying that such women are more likely to access financing and mentoring and networking opportunities. With this in mind, women need comprehensive support for them to be successful start-up-owners and entrepreneurs. This could be in the form of increased access to finance, financial literacy, business skills, mentoring, and networking opportunities. This support can help women cross over into male-dominated sectors.
Governments should remove barriers to change
Governments should aim to remove or reduce barriers to women's education and focus on increasing women's education beyond primary school. To benefit out-of-school girls who have little or no prospects of furthering their education, governments should aim to increase their access to vocational education to prepare young women for high-value entrepreneurship jobs.
Finance women-owned businesses
Available statistics show good business reasons for financial institutions to embrace women entrepreneurs. For example, research shows that women tend to be more disciplined in loan repayments. As such, banks and other financiers should make a deliberate effort to design and deliver financial services tailored to the female market segment to fuel women-led micro, small, and medium-sized enterprises (MSMEs).
Business Partners International (BPI) is already leading the way on this front. In July last year, the company, together with partners, embarked on a programme that seeks to empower women in business by offering them gender-smart training and affordable credit. Through the programme dubbed Second Chance, BPI is working with women entrepreneurs in Kenya and Rwanda who applied but failed to get financing from BPI. This firm offers specialised business finance to small and medium business owners.
After training, the entrepreneurs will re-apply for financing through the 'second chance' window. It is hoped that the training will improve the women's chances of getting a business loan. It will also improve their money management skills, help them run their enterprises more efficiently, and ultimately increase business survival chances. At the end of the project, the partners hope they can make a critical contribution to the gender-lens investing field by demonstrating both the business case for and the efficacy of approaches to finance women entrepreneurs.
As a whole, the BPI programme will contribute to the growth of MSMEs in the East African region, empower women economically, and lead to job creation.
The BPI example is just one of the many propositions benefitting women. Government and the financial sector institutions should partner more to help women circumvent the barriers they face and empower them to start and run successful businesses that contribute to wealth and employment creation.