COVID-19 and women-led businesses: More innovation but greater financial risk

COVID-19 and women-led businesses: More innovation but greater financial risk

Over a year into the pandemic, we have witnessed how a sweeping infectious disease and lockdown measures quickly deepened inequalities, hindering the progress that many have fought for years to achieve. One of the most striking examples is the disproportionate impact of COVID-19 on women.

The pandemic is not gender-blind: Women are doing more domestic chores and family care than men. They have been more likely to lose jobs than male counterparts, and sectors that employ a higher share of women have been especially affected by the crisis.

A recent World Bank paper reveals that women-led businesses were also unequally affected by the crisis when compared to businesses led by men.  This is the case particularly in sectors that were hit hard by COVID-19, such as the hospitality industry, as well as in microbusinesses.

Since the onset of the pandemic, the World Bank has been conducting surveys with about 45,000 firms in 49 mostly low- and middle-income countries, to grasp the impact of the crisis on companies. To understand specifically its effects on women-led enterprises, we decided to look at survey data gathered from April to September 2020—arguably the most challenging months for many businesses around the globe. The results of this study—the first global assessment of gender differences in the impacts of COVID-19 on enterprises—were sobering.

For instance, in the hospitality industry, while men-led companies exhibited a 60 percent year-on-year drop in anticipated sales, those led by women estimated a 68 percent decrease (controlling for size, income, and the severity of the shock). Similarly, women-led businesses faced greater financial risk, with many reporting having less cash available to cover their costs than their male counterparts.

Despite the challenges, women-led businesses are responding to the COVID-19 crisis with resilience and innovation. In fact, our survey found that women-led small and microbusinesses were much more likely to increase the use of digital platforms compared to those led by men.  While firms globally are turning to technology to cope with the pandemic, it was encouraging to see that women-led microbusinesses are leading the charge.

In addition to asking businesses about the impact of the pandemic, we were curious to find out the extent to which they benefited from public support programs enacted by governments around the globe. Here, the gender gap remains. On average, women-led businesses were 2 percentage points less likely to report accessing public support compared to companies led by men.  This shows a need for policy makers to raise awareness among women-led businesses of the available support programs, as well as to better inform women managers and owners on how they may benefit from these policy measures.

The COVID-19 crisis is still evolving every minute. While vaccination campaigns across the world have helped businesses reopen and recover, it is vital for policy makers and the global development community to keep track of gender-disaggregated data on the impact of the pandemic on companies, especially those in hard-hit sectors. This information will be crucial as countries work to build a more equal and resilient economy.