In recent years, we have seen female entrepreneurship around the world trending upwards. Surveyed across 63 economies, the latest research from Global Entrepreneurship Monitor (GEM) 2016/2017 showed that female entrepreneurship rates rose by 10 percent and the gender gap ratio narrowed by 5 percent since 2014. These same economies also revealed an 8 percent increase in women’s ownership of established businesses.
Experts have agreed for several years that increased diversity and female entrepreneurship brings positive impact to the economy providing the potential to drive major economic growth. In 2015, McKinsey Global Institute reported that empowering women to participate equally in the global economy could add US$28 trillion in GDP growth by 2025!
Why are women exceptionally positioned to improve a country’s economic circumstances, and how significant is their impact to global economic development?
Double growth and job creation
With the right conditions and resources available for women entrepreneurs to succeed, women entrepreneurs make significant contributions to job creation and economic growth, at a faster rate than their male counterparts.
According to a 2010 research conducted by International Finance Corporation (IFC), women-owned businesses in the United States grew at 23 percent – more than double the growth rate of all other firms (at 9 percent). These businesses contributed US$3 trillion to the U.S. economy and were directly responsible for creating 23 million jobs. Data projections suggest that job creation in 2018 coming from women entrepreneurs would reach an estimated 5 million new jobs in the U.S.
The annual growth rate of women-owned businesses in South-East Asia are higher than that of men. The annual growth rate of women-owned businesses in Indonesia and Malaysia were 8.1 percent and 9.7 percent respectively compared to lower rate recorded by their male counterparts at -0.27 percent and 7.43 percent respectively.
Bringing more women entrepreneurs into the marketplace does not necessarily drive others out of business – rather it offers another means to generate income (enlarging the pie) and reduce gender inequalities.
Catalysts for next generation development
Especially those in emerging economies, women entrepreneurs are major catalysts for development as they typically reinvest their earnings – as much as 90 percent – back into the local economy. They are more inclined to reinvest their profits in children’s education, health, family and community.
The radical idea of Muhammed Yunus, the Bangladeshi economist, micro-financing pioneer and founder of Grameen Bank shows that that if the poor were given a proper start and encouragement, their natural entrepreneurship would develop and thrive. Today, Grameen Bank has nine million borrowers, 97 percent of them are women. Studies have indicated that the women have used the micro-credit loan to invest in their businesses that generating income which is subsequently used to educate their children and lift their families out of poverty.
This suggests that entrepreneurship can break the hold of poverty on the lives of women and their families. In Latin America and the Caribbean, the World Bank had found that women have played a critical role in the decline of poverty owing to women’s economic participation, contributing to a 30 percent reduction in extreme poverty over a period of ten years.
As women gain access to financial freedom, they are more empowered to take steps to ensure that their children are educated and have access to better healthcare. This “smart economics” then creates a pool of educated, skilled and healthy human capital for the next generation. Overall, this results in improved economic growth and reduced gender inequality.
Women look at the world differently than men. Through their creativity and innovation, women entrepreneurs introduce new products, new export markets or sources of supply, new types of processes or new use for a good or service. Women (generally) have different roles, values and needs, therefore they have access to different niches than men. As such, they could potentially evolve existing industries or create new ones that could further increase a nation’s growth.
For instance, in Singapore, Gillian Tee co-founded Homage, a social enterprise that is transforming eldercare through a holistic set of healthcare and wellness solutions using technology. Homage provides caregiving for the elderly by using apps to match senior citizens with trained and certified care professionals. The service was launched in 2016 and has since expanded to cover areas such as physiology, speech and occupational therapy. Homage has 300 caregivers and has delivered more than 20,000 hours of caregiving.
According to the Institute for Women’s Policy Research in 2018, several product innovations by American women entrepreneurs are associated with business outcomes – 16 percent of women-owned businesses that sold a new good or service earned nearly 30 percent of all revenues among women-owned businesses. By integrating more women entrepreneurs into the innovation ecosystem, we will all benefit from the diverse innovative contributions available in identifying and developing solutions.
It is clear that women entrepreneurs are making headways creating pockets of economic growth, and that they have a valuable and diverse perspective which can further transform overall economic development.
By supporting programs that help women to learn about entrepreneurship, removing barriers to entrepreneurship for them, giving them access to financial support, and connecting them with successful female entrepreneurs, women can build strong businesses, strengthen their positions in their local economy, and build a stronger and better marketplace.
Unleashing women’s entrepreneurship will make all economies and societies stronger as we proceed into the 21st century.