Globalization, technological advancement and the new wave of eco-friendly lifestyle for preservation and sustainability of environment have altered the way we live, operate and function in our day-to-day lives. In this fast-changing life, it is difficult to identify growth-driving factors that help shape our nation’s future for the best, but sometimes the answers are in plain sight.
One of those driving factors leading to economic growth is women-owned businesses. They are powerful but sadly vastly untapped in their potential. The numbers of women-owned business are on a surge in United States, Europe, Asia and Africa. Women-owned businesses have been growing dramatically in the US for the past two decades. The US economy experienced a surge from $5.4 to $10.4 million between 1992 and 2006. In the last decade, they have represented exponential economic growth of Small And Medium-Sized Enterprises (SMEs) according to Center of Women Business Research (CWBR). The highest spike was seen in 2014, when women-owned businesses generated $3.6 trillion in sales and accounted for 55% of all newly established businesses.
A study on startups and their performance published by Boston Consulting Group and Mass Challenge found that women owned businesses were generating more revenue as compared to others categories.
Another study published in the Asia Pacific Journal of Innovation and Entrepreneurship by students at COMSATS University used data from the Female Entrepreneurship Index (FEI) 2015, report developed by Global Entrepreneurship and Development Institute (GEDI). In the selected sample of 77 countries for female entrepreneurs, the USA ranks first with 82.9 points out of 100. Australia is ranked second with 74.8 points, while UK, Denmark and the Netherlands stand third, fourth and fifth with 70.6, 69.7 and 68.8 points, respectively. In total, 61% of countries are under 50 points, indicating that in many parts of the world, women are destitute and need social support or infrastructure to grow as successful entrepreneurs. At the macro level, the risk of doing business has decreased in these 77 countries and access to resources has increased to 13%, while technology transfer rate has improved by 18% as a whole but unfortunately, the rate for female entrepreneurs has only increased by 7%.
Therefore, there is a great need to dig in to why the growing pace of female entrepreneurs is incompatible with other economic development strategies. By combining female entrepreneurship with other dimensions of global economic development and gender inequality, this study contributes specifically to the body of knowledge to measure the pace of economic development at the global level.
There is ample data present to support the notion that women in today’s world are proving to be the most beneficial and major contributors in the global economy. Despite the progress, they also face many challenges including generating funds, accessing capital, gaining market share, cash flow maintenance, lack of training and technical assistance, managing business expansion, constraints in client budgets and undermining of female entrepreneurs. Statistical progress shown by women-owned business still has not dented the global phenomenon of gender gap and gender discrimination.
This is not a developing country issue but a global one; there are only about ten countries in the world where entrepreneurship across genders is balanced. In developing nations, quite frequently, women have a hard time securing financing they require to expand their businesses. According to current records, the unmet demand for credit women-owned SMEs is estimated at $1.7 Trillion. There is an immense opportunity in favor of financial institutions that want to tap new markets and growth sources if we cover the required capital gap.
Another issue is that most of export model-based companies are owned by men. According to International Trade Centre, women-owned export businesses are in a ratio of 1:5 compared to men, even though women-owned SMEs that are based on export business model pay more, earn more and provide more employment opportunities than the companies that operate domestically.
Women-owned businesses have saturated low-growth and low-profitability sectors. Most of the women are focused in retail, beauty or food services. About 75% of African and Asian women are working in consumer-oriented sectors. A very low percentage of women can be found in highly profitable sectors like mining, construction, software or electronics. According to Senior Director at the World Bank, Caren Grown, if we get into the categories of sectors where women-owned businesses are generating more revenue, we can very well see why there is still gender earning gap. “Most percentage of women owned businesses is in sectors that are low earning and domestically focused with low prospects of economic and business growth.”
Support Women-Owned Businesses
First, private financial institutions need to design banking services aimed to meet the needs of female entrepreneurs. Women face social, and cultural barriers that reflect unparalleled bias in the construction and delivery of business and financial services that leads to lost opportunities for growth. Services to help women-owned business gain market share and developing critical tools are important, such as business-to-business platforms, legal services, communication and management training that can benefit all customers, not just women.
Second, bank regulators must produce and share financially segregated information to female business clients. Good information will allow financial institutions and public sector actors alike to better understand the lost market. The World Bank Group creates and shares information, such as the Global Findex database investment, Ministry of Micro, Small and Medium Enterprises (MSME) database, and the Women, Business and Law (WBL) report but we need more information from other sectors of society.
Third, financial institutions and businesses should seek to differentiate themselves from their Board of Directors (BODs) and senior teams in order to grasp the changing nature of customers, employees, and industry trends. The International Monetary Fund (IMF) has produced a study showing that the presence of women on bank BODs is associated with greater bank stability, including higher capital buffers and lower interest rates. In addition, research by McKinsey & Company has repeatedly shown that high gender and racial diversity is associated with greater financial returns.
However, these actions are not enough. It will take continuous collaboration between multinational institutions, governments, and the private sector to fill huge gaps in support of women-owned enterprises around the world, by designing products and services keeping women in mind, producing gender segregated information, and diversifying corporate and board management.
For greater economic development, women need to cross into the sphere of domination of men. This would give them a chance to earn three times as much money as they do in traditional women's fields. Women in developing countries can help eradicate poverty and uplift the entire economy by entering the male-dominated sectors and thus providing more opportunities for women to develop businesses, learn, and grow. This may change the mindset of financial leaders who put women in a profit-oriented business.
In short, female entrepreneurs can view their contribution as an important tool for economic development, social development and sustainable development. This contribution is in line with the principles of education, better health of the community and in all other areas where people grow and thrive. The positive impact of female entrepreneurship on the global economy needs to be recognized. It is time that developed and developing countries work together to promote and support women-owned enterprises for a better and more sustainable future. HH
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