Why Women-Owned Startups Could End Poverty (and the Numbers Back It Up)
World Bank Group president Jim Yong Kim says one of the quickest ways to end poverty is increasing the ranks of female entrepreneurs. The U.S. should pay attention to the breakthroughs happening in the developing world.
PHOTO CREDIT: Getty Images
In the Democratic Republic of the Congo, Kany Mufuta runs a small company that produces flour from cassava root. Demand for her product is booming, but she doesn't have the resources to buy new equipment to expand production. Kany got a small loan from a program sponsored by the World Bank Group, but when she looked for other sources of capital, local banks could offer only loans with high interest rates. With the additional capital, Kany would be able to reach new customers, help fill an unmet demand for cassava root, and create much-needed jobs in a country with an extraordinarily high unemployment rate.
Kany's story resonates from San Francisco to Shanghai to Senegal. Whether they're in the Democratic Republic of the Congo producing flour from cassava root or in North Dakota producing it from wheat, women entrepreneurs face many of the same roadblocks.
$325 millionThe amount contributed by 13 countries to the World Bank Group's new Women Entrepreneurs Finance Initiative (We-Fi), which supports programs that eliminate barriers for small and medium-size women-owned businesses4 to 5 millionThe number of nano- and micro-enterprises in poor, rural areas in India initially supported by state-level investment that have grown into small and medium-size enterprises over the past 15 years40 percentThe amount of increased business profits, in one pilot program in Togo, for women who have taken personal initiative trainingSources: ChiefExecutive.net's "CEO and Senior Executive Compensation Report," Advanced-HR's "2016 Executive Compensation Trend Report," Founders Fund
Globally, women-owned entities represent just over 30 percent of formal, registered businesses. We need to significantly increase that number, since women-owned businesses create jobs, ultimately helping us reach our goal of ending extreme poverty that much faster.
In many developing countries, women face societal norms and laws that block them from owning property or working without the permission of a male relative. But some challenges are global: Too many women don't have access to the capital or professional networks necessary for them to succeed. We're finding new ways to knock down these barriers, and the lessons we're learning in one country can benefit women in many others.
We've found that programs combining credit with training, mentoring, and access to networks--building "ecosystems"--have a much better track record helping women start and run businesses. We're finding that traditional managerial training has limited impact on the performance of women-led businesses, while programs focusing on softer skills--like perseverance, innovation, and goal-setting--have more positive results.
In Togo, we found that personal initiative training increased women's business profits by 40 percent, compared with 5 percent for traditional business training. Now, we're applying those lessons to projects in Mexico, Mauritania, Mozambique, and Ethiopia. These softer skills are taught through a psychology-based approach, which promotes a proactive mindset focusing on entrepreneurial behaviors.
As in Silicon Valley, projects in Congo and Guinea use information, mentorship, and early exposure to encourage women to enter high-performing, male-dominated businesses. Incubators and accelerators in Pakistan, Nigeria, and the Middle East are boosting female participation by tapping into universities, women's groups, and other networks--just as incubators and accelerators in major U.S. cities are doing.
Every program varies depending on local circumstances, but it's not an exaggeration to assume that lessons from other parts of the world can apply to the United States, and vice versa. Can projects from India be tailored for Appalachia? Would Togo's soft-skills approach work in America's Rust Belt? An exciting cross-pollination of global ideas is taking hold as businesses, financial institutions, nonprofits, and other organizations look for ways to break down the barriers that hold back women entrepreneurs.
As we learn more every day, let's accelerate our efforts to take what works, scale it up, and unleash the full potential of women around the world.