Female-owned firms tend to be larger and far more well established than presumed.
Non-business barriers prevent women's entrepreneurship in the region from reaching its potential.
Reforming the business climate would help both male and female entrepreneurs as well as addressing gender-specific hurdles inside and outside the business environment.
December 18, 2007— A new World Bank study debunks the impression that women's entrepreneurship in the Middle East and North Africa consists of micro or small scale, low-tech efforts.
"The commonly held perception is that women-owned businesses are small and informal, that they're less sophisticated, and that they're huddled in certain sectors," says Nadereh Chamlou, lead author of The Environment for Women's Entrepreneurship in the Middle East and North Africa. "What we are finding defies the perceptions."
In fact, there is very little difference between male and female-owned firms in the Middle East and North Africa (MENA). A major finding of the study is that female-owned firms in the region are as well-established, productive, technologically savvy and connected to global markets as male-owned firms.
One difference is that the share of firms employing more than 100 employees is on average higher among female-owned firms (31 percent) than male-owned firms (24 percent). And skilled and professional workers constitute a higher percentage of the work force of female-owned firms, according to the study.
Not only do female-owned firms hire more women than male-owned firms (with the exception of Lebanon and Saudi Arabia), they also employ a higher share of female workers at the professional and managerial levels. Female-owned firms in Egypt, Jordan, Saudi Arabia, and the West Bank and Gaza also increased their workforce on average more workers than did their male counterparts during two observation periods included in the study.
Despite these firms' similar characteristics and performance, the study also notes that women's entrepreneurship in the region isn't reaching its potential, despite an investment climate that is "much less gendered than suspected."
Only 13 percent of 4,832 firms surveyed in the eight countries were owned by women, says the study.
"Women entrepreneurs are a minority everywhere," says Chamlou, Senior Advisor at the World Bank. "But their share in the Middle East and North Africa (MENA) is lower than in other middle-income regions of East Asia, Latin America and the Caribbean, and Europe and Central Asia."
'Cumbersome' Environment
The Environment for Women's Entrepreneurship in MENA found the investment climate to be fairly gender neutral, with fewer gender-based barriers in the business environment than presumed.
"More striking is that all firms in the Middle East and North Africa perceive the business environment as more cumbersome than do firms in other middle-income regions, regardless of the owner's gender," notes the study.
The study used data from the World Bank's Enterprise Surveys of thousands of business establishments throughout the world. The surveys ask firms to assess their country's investment climate along 18 categories, rating restraints as minor, moderate, major, or severely binding. Participants in the Middle East and North Africa region included some 4,832 firms in Egypt, Jordan, Lebanon, Morocco, Saudi Arabia, Syria, Gaza and the West Bank, and Yemen.
One category—access to finance—is often presumed as a barrier to female entrepreneurs, but was not affected by gender in MENA countries except for Yemen, according to the study. Access to and cost of finance was a high barrier for both men and women. Corruption was also seen as a high barrier for all.
The study found some differences linked to the gender of the business owner, after controlling for size, sector, location, and age. In Egypt, for instance, female-owned firms reported more power outages than their male counterparts, and took, on average, eight months longer to resolve disputes over overdue payments. Female-owned firms in Lebanon and Saudi Arabia viewed transportation as a bigger barrier than male-owned firms. Yemen and Lebanon had the most gendered business environments.
"Not only do female-owned firms hire more women than male-owned firms (with the exception of Lebanon and Saudi Arabia), they also employ a higher share of female workers at the professional and managerial levels."
Why so Few Female Entrepreneurs?
High barriers in the business environment in general act as a greater disincentive to women than to men, according to the World Bank Group's Doing Business Report of 2008. But, differential treatment under laws outside the business legislation, as well as social norms and negative attitudes toward working women dampen female entrepreneurship even further, says report.
High capital requirements and lengthy and costly procedures for starting and exiting a business, while borne by all entrepreneurs in MENA, may pose greater barriers to women because women require "greater flexibility to scale down or abandon business aspirations to meet family needs."
According to Doing Business data, getting out of a business takes about 3 ½ years and generally results in an entrepreneur retaining only about 30 percent of their start-up capital.
"If you have these difficult barriers to enter and exit, you might say, Should I really do this or should I just work informally?" says Chamlou.
Women have strong economic rights under the Islamic shari'a, but other legislation reinforce gender roles, such as viewing men as the main breadwinners, which lead to "overprotective laws or gendered legal interpretations," the study says.
For instance, labor codes include provisions that disallow work during certain hours and require the husband's permission to work. The labor codes of Yemen, Egypt, Kuwait, Lebanon, and Iran bar women from working during evening or night hours. In most countries, women must get the husband's legal permission to travel or obtain a passport, which is essential for conducting business.
Indeed, fewer women in MENA participate in the economic and political spheres than in any other region. Despite strong economic and job growth since 2000 and major gains in girls' education, female unemployment is high and rising, with the highest unemployment among the most educated women, says the study.
"Women still do not have equal access to economic opportunity," says Mustapha K Nabli, World Bank Chief Economist for the MENA region. "Just the same way as women still face more barriers inside and outside the labor market despite educational gains, women face additional barriers in the business environment despite their capabilities and business acumen."
Female Entrepreneurs Needed
"It is clear that women entrepreneurs play a far more important role in the region's economies than previously thought," said Daniela Gressani, World Bank Vice President for the Middle East and North Africa Region . "But there are still too few of them."
More female entrepreneurs are needed in MENA to help diversify the economy and create 54 million jobs for an estimated 174 million-strong work force by 2030.
Reforming the business climate to reduce barriers to opening and closing firms would benefit all entrepreneurs but particularly help women. Policymakers in the region also need to address gendered social norms and differential treatment under the law to level the playing field for women.
"Female entrepreneurs can become an engine of growth," says Chamlou. "Women's entrepreneurship could help the region meet its challenges, because empowering women and diversifying the economy can go together - and help the region meet the critical challenge of creating more and better jobs."
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