Strong gains in education fuel women’s motivations for entrepreneurship and economic empowerment. Yet they face many closed doors to establish, register and grow their businesses in Asia and the Pacific.
In Nepal, Sarita Kumari wants to expand her food processing business in Kathmandu beyond selling spice packs in the local market. But banks reject her loan applications because she does not own land or property as collateral. The process is too complicated and biased, requiring a male guarantor. Her husband is nervous about sinking into debt and doubts she can manage a business while taking care of their household and four children.
Across the region, millions of women like Sarita still lack access to finance. According to a report by the International Finance Corporation, this was true in 2012 for 73% of women-owned/led small and medium-sized enterprises (SMEs) in India.
In Cambodia, Indonesia and Viet Nam, on average only 5%-6% of micro, 12%-15% of small and 17%-21% of medium-sized enterprises owned or led by women could obtain formal credit.
Cumbersome registration and licensing processes also deter women. It takes on average 47 days to formalize a business in Indonesia, 36 days in the Pacific, 33 days in the People’s Republic of China (PRC), and 27 days in India.
Women also face intangible barriers under social norms. These limit their choices in education, marriage and independent business registration and transactions. Time constraints due to unpaid care work restrict participation in business associations.
Despite these obstacles, women-owned micro, small and medium-sized enterprises (MSMEs) are growing rapidly in Southeast Asia (especially in Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam) and in East Asia (PRC and Mongolia). Progress has been lagging in South Asia, where women own less than 10% of MSMEs.
Women become entrepreneurs for different reasons. Petty traders in the informal market aim to earn a few extra dollars to put food on the table. Others, lacking formal wage employment, start mostly low-income micro-enterprises in agriculture or food processing, beauty and tailoring services, and handicrafts production.
A notable trend is more women entrepreneurs turning innovative ideas into profitable businesses in wholesale/retail trade (87% of businesses started by women entrepreneurs in the Philippines), hotels and restaurants, government/health/education and social services and textile manufacturing. Women entrepreneurs are starting to compete in the ICT sector, with Chinese women owning half the start-ups in “internet business”.
Governments, NGOs, women’s business associations, banks, the private sector, and donor agencies have long been involved in helping women entrepreneurs in developing Asia.
What have we learned from these efforts, and what keys can open the toughest doors women entrepreneurs face?
First, it’s critical to have a coherent SME policy framework to promote female entrepreneurship.
A great example is the Philippines, where the government has enacted gender-specific laws and strategies, mainstreamed gender into broader MSME statutes and regulations and opened business support centers. The impact is clear: 53% of registered MSMEs in the country are now women-led.
Second, legal and regulatory reforms are essential. Viet Nam amended the Land Law issuing husbands and wives joint titles, leading to 42% of women using land as collateral to access bank loans.
In the Pacific, ADB has supported the Solomon Islands to eliminate the male co-signature requirement on registering women’s enterprises, and assisted Tonga to develop an electronic business registration and licensing system. These legal and regulatory reforms lowered time, mobility, and social barriers for women to formalize their businesses.
Third, it’s time to go beyond microfinance. While group lending schemes, loan guarantees, and secured transaction laws allowing women to use movable assets—equipment, jewelry, and accounts receivable—have softened collateral requirements, micro-loan ceilings with high interest rates stifle the growth of micro-enterprises.
Some bankers hold biased perceptions that lending to women is risky. With limited financial literacy, women entrepreneurs struggle to prepare sound business investment plans to apply for larger commercial bank loans.
To address this issue, ADB provides loans, guarantees and equity investments in financial institutions, requiring a fixed percentage of credit facilities in loan projects to be directed to women-owned SMEs.
Grant support to women’s business associations helps build women entrepreneurs’ capacity to access credit, and trains bank staffers to better understand their needs. The global Women Entrepreneurs Finance Initiative (We-Fi) grant approved in April 2018 will enable ADB to increase support to women-owned SMEs in Sri Lanka.
The Women Entrepreneurs Opportunity Facility, launched in 2014 by the International Finance Corporation and the Goldman Sachs Foundation, has been instrumental in curbing the gender credit gap in Asia. It has provided lines of credit to large commercial banks like Bank Luoyang (PRC), India’s YES Bank, and ACLEDA in Cambodia to share the perceived risk of lending to women-owned SMEs so they can grow beyond micro-scale.
MSMEs account for over 96% of all enterprises in Asia and the Pacific, contributing 42% of GDP and 62% of employment. As contributions of women’s MSMEs to economic growth are valued, new funding windows open like government-led technology and innovation matching grants in Georgia, an angel investor fund for women in Indonesia, and crowdfunding in the PRC.
Fourth, access to finance alone is insufficient. Women’s MSMEs rely on business development services (BDS), training and business networks that women’s business associations and NGOs provide as backbone support. Business incubators for women startups and entrepreneurs in Mongolia and other countries also facilitate access to office space, bank loans, and marketing outlets.
Businesswomen’s associations across Asia also represent women’s voices in catalyzing policy reforms, softening social attitudes on women’s entrepreneurship, and providing linkages to regional networks such as the ASEAN Women’s Entrepreneurship Network to broaden opportunities.
The positive impact of BDS is clear. The Goldman Sachs Foundation’s five-year 10,000 Women Initiative, helped women with growth-oriented SMEs in 56 countries become more confident decision-makers and negotiators and expand their businesses five-fold, increasing revenues and jobs.
Finally, women entrepreneurs in today’s interconnected world need access to mobile phones, the internet, computers, and training in digital literacy. ICT affordability, accessibility and connectivity pose major constraints to using technology for business growth.
From the “mobile revolution” introduced by Grameen Telecom’s Village Phone Program in late 1990s in Bangladesh to the current e-commerce platforms dominated by women vendors and consumers in the PRC, we have witnessed how ICTs reduce constraints on women’s time and mobility and enable them to transcend cultural barriers. ICTs open new doors for women entrepreneurs to access mobile banking services, angel investors, as well as on-line marketing platforms, business networks and skills training.
Many lessons have been learned, and there are promising initiatives and growing momentum and commitment by the development community to help women entrepreneurs in Asia and the Pacific to flourish.
Let’s build on these lessons, replicate best practices, and empower women-led businesses to grow and reach their enormous potential.
This blog relates to the 2018 ADB Annual Meeting seminar Breaking Barriers: Women Entrepreneurs in Asia and the Pacific. Follow the 2018 ADB Annual Meeting on Twitter @ADB_HQ using the hashtag #ADBManila.