Cultural Barriers to Economic Success for Women: The Importance of Research and Data

By Madeleine Macks
posted on February 18, 2014 in Economics and Finance, Global Development

As United Nations Secretary General Ban Ki Moon said in his address to the U.N. General Assembly in September, 2013,  “The equation is simple: When girls are healthy and in school, when legal frameworks and financial access support women, when women’s lives are free of violence and discrimination, nations thrive.” The Secretary General went on to declare the 21st Century as the century of women, and called for a greater focus on women in future development agendas.

His message is certainly on point. In practice, however, creating the parameters within which women in the developing world can succeed, and thus help their nations thrive, is a pervasive and multi-layered challenge. As a result of particular expectations and attitudes in many parts of the world, women may be unable to take advantage of opportunities that are as beneficial to men within their very same communities.  Research and data on these cultural and regional factors can inform future interventions to better ensure effectiveness in creating economic success and growth for women.  The recent study Stimulating Microenterprise Growth: Results from a Loans, Grants and Training Experiment in Uganda, which explores financial access, one of the issues Ban Ki Moon addressed in his speech, demonstrates the benefits of collecting data to better understand the complex barriers to success women face.

Recognizing that access to capital, ability, and lack of skills can be obstacles to growth for many microenterprises, researcher Nathan Fiala designed an experiment that sought to test for these business constraints to identify what types of interventions might result in growth. From February 2012 to July 2013, he studied 1550 microenterprises in central and northern Uganda whose owners, 61% of whom were women, had expressed interest in growing their business and had been given an infusion of capital in the form of a grant or loan, with or without business training. The remaining microenterprise owners were part of a control group.

Though not all of the experimental groups showed increased profits, men who were given a loan combined with training reported an average increase in profits of 54%. The same did not hold true, however, for the women’s experimental group given a loan with training. In fact, women saw no improvement in any of the experimental categories.

What caused the difference in profit growth separated along the lines of gender? Just like the men in the study, women had the ability and knowledge to own their microenterprises, had expressed an interest in growing their businesses, and were given more access to capital. This is the critical juncture at which Fiala’s data lends important insight: his study concludes that family proximity likely explains the different success rates for men and women in the sample.

Though women did not see profit increases in any of the groups, those women who had family living nearby were more likely to fare worse. The effects of the loan, loan with training, and grant with training programs for women with family nearby were all “large, negative, and significant.” Further analysis demonstrated that these negative effects associated with nearby family members were present for married female microenterprise owners, implying that increased demands on cash from the husband or husband’s family in the presence of a loan or grant diverted resources away from the enterprise and thus diminished business returns. These demands caused the women in the study to lose their capital stock over time

Based on the results, Fiala concludes that “highly motivated and skilled male-owned microenterprises can grow through finance, but the current finance model does not work for female-owned enterprises.” Many women in the study seemed to face pressures that detracted from their ability to take advantage of access to financial tools. Fiala’s research helped to highlight this problem and demonstrates the complex challenges faced by women microenterprise owners in the developing world.

Conventional economic wisdom teaches that with a viable business model, the combination of funds and skills is a successful formula for growth. The results of Fiala’s study suggest, however, that access to capital and business training may not be effective if the regional economic ecosystem is not optimal for business growth. In Uganda, where traditional pressures women face seem to override the value placed on their entrepreneurial goals, these interventions can have little effect. Transplanting solutions for economic growth from communities where “conventional” business strategies are widely supported and viable into communities that have conflicting attitudes and expectations will not necessarily result in success.

The challenge unearthed by Fiala’s study raises the question of how to go about transforming values so that women can take advantage of opportunities for entrepreneurial growth. This is valid not only in Uganda, but in the rest of Africa where variations of these same barriers are common. This is a question that is not easily solved, however. As Fiala’s work suggests, research and data are crucial first steps to making a change.

Fortunately, organizations are investing in understanding the challenges faced by women hoping to grow their businesses in developing communities. For example, Making Finance Work for Africa released a policy brief that identifies significant barriers to women’s financial inclusion in Africa and put forth recommendations on best practices for success. Other institutions have also completed more focused regional studies with recommendations for future program implementation. Understanding the particular cultural environment in which women are trying to succeed in growing their business is the key to ultimately designing programs and interventions to provide opportunities within those communities. More informed future practices will help make Ban Ki Moon’s vision of the century of women a reality.