Against all odds: Women entrepreneurs in the region
by Professor Bettina Bastian
Middle Eastern and North African countries (MENA) have made some progress in reducing inequalities between men and women during the past decades, especially in the areas of health and education.
Another area is entrepreneurship, where the active role of women has been widely recognised in terms of economic growth and development by organisations such as OECD, the World Bank, and EU. In fact, womens businesses are considered to be an important source for job creation and economic development. Recently, the Kaufmann Foundation studied the role of women entrepreneurs in the US and showed that the acceleration of female entrepreneurship may have a similar positive economic effect on the country like the large-scale entry of women into the labour market.1 Also in MENA, women business starters have received increasing attention by policy makers and the larger public. In fact, women entrepreneurship has increased in many countries over the past years. An example is Egypt where the percentage of ventures started by women between 2008 and 2010 grew from 20% to 35%.2
However, women entrepreneurship is still quite a challenge in a region that displays one of the lowest rates of general entrepreneurial activities worldwide with an average of 8.6% of the adult population engaging in early stage entrepreneurial activities (e.g. start-ups), compared to Latin America with 17.6%, for example, or Asia with 12%3. In this context it comes as no surprise that female participation in entrepreneurship is also one of the lowest across all world regions4. In most MENA countries more than two thirds of businesses are founded by men5.
In some countries, like Egypt and Palestine, less than one-fifth of all business founders are females.
Womens businesses in the region are also 60% more likely to remain a single person firm without any employees and women’s expectations regarding future growth of their businesses are consistently lower than those of men too6. Only 1/ 10 of women in the region expect their business to grow and to hire additional personnel in the coming years.7 Moreover, women tend to perceive less market opportunities than their male counterparts and this gap in the MENA region, again, is the greatest across all global regions.8 Additionally, women in the region have greater difficulties in translating intentions to start a business into action: for every female entrepreneur, six other women would like to start their own venture, but despite positive attitudes and intentions towards freelance activities only very few of them realise their dreams.9 Currently, a large entrepreneurial potential lies idle and we need to address obstacles facing women to become entrepreneurs in order to reduce this divide. In the following section, I will address some important issues that have been identified by researchers as stumbling blocks for female entrepreneurs in the region.
Socio- Cultural Factors
Quite a few discrepancies regarding the level of female entrepreneurship have been attributed to different cultures, notably, different values, beliefs and behaviours that prevail within countries. Culture is reflected in a country’s social, political and legal institutions (e.g., families, governments, laws and regulations), and it also influences people’s behaviour.10 MENA countries are predominantly male oriented societies, which ascribe to men the role of ‘bread winner’ and ‘head of family’. On the other hand, the role of women is predominantly seen as caregiver, wife and mother11.
Moreover, Arab societies are collectivistic, and as such emphasize conformity with family and tribes.12 Family members, for example, are expected to submit their individual needs and aspirations under the goals of the group (e.g. the family). However, entrepreneurial endeavours require the opposite; notably, entrepreneurship necessitates independence, autonomy and pro-activeness on behalf of women (and men), all traits that clash with existing traditional cultures. Islam, as the predominant religion of the region, is in favour of ‘women in business’ (for example, Khadija, first wife of Prophet Mohammed was a successful entrepreneur herself)13.
Nevertheless, local interpretations of the Koran have led to a culture where men are endowed with great authority over women in terms of financial responsibility, inheritance, marriage and divorce14, which makes it very difficult for women to challenge these assigned roles.
Thus, female entrepreneurs in the region are obliged to continuously navigate and negotiate their entrepreneurial engagements with families and friends.15 Albeit, more liberal views and values have been introduced to MENA countries over time – especially in the professional arenas – modern values seem to affect men and women very differently. My own research on the topic shows that men benefit much more from such an environment, and feel incited to search for greater professional liberties, such as freelance activities.
On the other hand, female motivation to seek individual professional fulfillment and to start a business has not been affected by the introduction of more modern values. Basically, women remain constrained in their entrepreneurial efforts by patriarchal traditions. Local laws often also reflect and enforce certain cultural values, thus constitutional and statutory provisions often hamper female entrepreneurial aspiration.
Some examples are Jordan, Kuwait, in the UAE and even in Palestine, where husbands can prevent their wives from working; or Jordan, Kuwait, Egypt; Oman, Saudi Arabia, the UAE and Yemen where women cannot apply for their own passports; or, as in Lebanon, Palestine and many others, it is the men who confer citizenship to their children. In most MENA countries, men are legally the ‘head of the household’ and they make the decisions about the family residence. Moreover, as head of the family they are responsible for obtaining all official documents regarding family members.16
Access to Finance
Access to credit is one the greatest concerns for all new ventures, but especially for women owned businesses. A recent study by the IFC17 estimates that about 70% of female ventures in developing and emerging countries receive no or too little funding by financial institutions in order to support and grow their ventures. The credit gap, which is the difference between the required and the actual levels of debt of a new venture, is estimated at about $280 billion. According to the IFC, the credit gap for women in the MENA region is the largest worldwide. The lack in funding is approximately $271,000 per women-owned SME (compared to approximately $18,700 per women-owned SME in East Asia).18 On average, women owned enterprises in the region have a 10% larger credit gap than men owned ones. Banks and other credit givers tend to perceive women as riskier customers, mainly because credit officers typically interact much less with women as clients and have very little information about this customer group. Moreover, women in the region tend to have smaller businesses for which financial institutions tend to expect lower returns due to their size.
Nevertheless, a recent study by Goldman Sachs19 demonstrates that access to capital is vital for the entire economy as it has a direct impact on per capita incomes of people. If the credit gap can be closed by 2020, average per capita income could increase by 12%.
Less relevant social networks and few business skills
Worldwide, women who start their businesses tend to use social networks in an ineffective manner: contrary to men, women know less people who could be relevant for their business, for example, other entrepreneurs, industry participants, competitors, etc. These people give access to new perspectives and information regarding business opportunities, markets, customers, strategies, and others. Women, on the other hand, rely more on private and family contacts20 that typically share similar ideas and understandings regarding entrepreneurial topics.
This limited social network creates a great disadvantage for women right from the start: they miss out on professional connections that could share their experiences and support them through mentorship.
The MENA region also has a very low female participation rate in the labour market, despite the increase in education among women.
Worldwide, among the 20 countries with the lowest participation rate, 15 of those are Arab countries.21 In twenty years, between 1991 and 2011, the participation rate of women has only increased from an average of 20% to 23%, compared to a world average of 50%.22 These low numbers also indicate that women in the region have very little professional exposure and few opportunities to develop necessary managerial skills and business acumen in order to develop and grow their ventures. Lack of professional experience prohibits women to be prepared for the basics like finance and accounting, compliance with laws and regulations, as well as marketing. Many female business owners lack strategy and planning – all important topics that need to be communicated to lenders and possibly investors – thus, going into their own venture would be beyond a leap of faith for most women.
Lack of female role models
A positive mindset, added to the will and confidence to succeed, is as important for entrepreneurial success as ideas and skills.
However, it is hard for women to imagine themselves as successful business founders if most of the role models, if not all, are males.
Entrepreneurship is associated with personalities such as Steve Jobs, Jeff Bezos, Bill Gates, or Fadi Ghandour from Aramex.
Entrepreneurship is essentially masculinised; entrepreneurial behaviour is being understood as masculine behaviour. And although very successful female entrepreneurs exist in the region, they are not as visible in media as their male counterparts. Successful women entrepreneurs help to set an example of what is possible. Without such role models it is very difficult for women to envisage themselves as business leaders. This is also visible in entrepreneurship education.
Globally, the majority of students at business schools are females23; however, only a minority of them actually attend entrepreneurship classes. Prof. Sally Jones from the University of Leeds, UK states that entrepreneurial research and education worldwide is based exclusively on the experiences of men and on studies related to traditionally male owned businesses and these ideas about entrepreneurs inform students’ expectations24.
Many women do not actually apply for entrepreneurship courses because they feel that there is a mismatch with their personalities.
It is important to raise women’s awareness for these topics and help them understand how such conditions have influenced their individual choices and often constrained their professional potential. In all MENA countries, certain socio-cultural obstacles limit women’s entrepreneurial endeavours. These obstacles are deeply rooted in traditions and old customs, which cannot be changed overnight. But many of these barriers for women are non-financial in nature, and raising awareness will contribute to create an environment that is more conducive to female entrepreneurs. Moreover, national governments need to support female entrepreneurs with campaigns that aim at changing public opinion regarding working women. There also needs to be an increased awareness on behalf of policy makers regarding biases against women in legal rights and regulations, and these need to be addressed. This involves the promotion and introduction of laws that fight gender discrimination in the public and private sectors, granting women equal rights, for example, to enter into contracts or to property, as well as to education. Media, especially those that are government controlled or supported, need to pay more attention to coverage of female entrepreneurship in terms of content and quantity.
The state also has an interest in closing the financing gap for female entrepreneurs, which requires thoroughly assessing all challenges facing female entrepreneurs and allocating the necessary resources in order to reduce financial gaps. Government action needs to be accompanied by private funding alternatives, which increasingly involve female investors. A recent longitudinal study on the crowdfunding platform ‘Kickstarter’ that involved 22,000 entrepreneurs found that crowdfunding proved a very relevant solution for female entrepreneurs. As crowdfunding is possible with very small investment amounts, many crowdfunding investors are women who are also more likely to invest into female-run projects. Moreover, fundraising campaigns by women had higher success rates than those by men.25 Equally, female angel investors, who are affluent individuals that invest in new ventures, need to play a greater role in order to close the capital gap.
Women currently represent about 23% of all business angel investors (an increase of 14% since 2005)26 and women-owned ventures that received angel capital represent 20%.27
A recent study on entrepreneurs in Latin America found that female and male entrepreneurs seek mentor support to help in their growth. However, men were more likely to seek a mentor outside their family and friends’ connections.28
It is necessary to change female habits by offering them platforms, such as increased representation of women at trade fairs and trade missions in order to give them more opportunities for networking. It will allow learning from female role models, which also might incite increasing numbers of women to consider entrepreneurship as a serious and viable professional path. My own research on entrepreneurial advice-seeking found that public advice, sponsored by local governments proved very valuable for entrepreneurs in the MENA region.29 My data indicates that entrepreneurial performance increased with more support entrepreneurs received from public advice institutions as a strategically important advice source. Public advice can supply firms with information, coaching and consulting on numerous innovation-relevant matters, (e.g. recent technology trends, market development, sector analysis, market opportunities, and guidance through entrepreneurial and innovation processes).
All these options can help to reduce the gender gap in entrepreneurship in our region and promote momentum for job creation.
Supporting women entrepreneurs is not only a question of social fairness and ethics, but also essential for economic growth and prosperity of MENA societies. It is essential for a sustainable future.
About the Author:
Dr. Bettina Bastian is Professor of Management and Entrepreneurship at the Olayan School of Business at the American University of Beirut and responsible for entrepreneurship and business ethics courses. She received a PhD in Strategic Management from the Ecole Polytechnique Fédérale de Lausanne (EPFL), Switzerland. Dr. Bastian is co-founder and associate of two start-ups, Bluetree Finance and Atlaswiss, in Switzerland.
Her primary area of interest is in entrepreneurship and innovation, where she studies how the political and social environment as well as institutional factors influence firms and entrepreneurs. She is also researching how technological changes brought about by the popularity of the internet affect entrepreneurs and their ecosystems in different countries. In 2013 she became co-founder and editor of the Journal of Advanced Research on Entrepreneurship and New Venture Creation. Dr. Bastian also holds a graduate degree in Political Science from the Free University of Berlin and a post-graduate Master in Energy Science and Engineering from EPFL and the Ecole du Petrole et des Moteurs, Paris.
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26 Klein, Karen, 2014, Rise of female Angel investors fuels women-run companies, Business Week,
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28 Inter American Development Bank, 2014, WEGrow: Unlocking the Growth Potential of Women Entrepreneurs in Latin America and the Caribbean
29 Bastian, B., C.L. Tucci, 2014, Entrepreneurial advice sources and their antecedents: venture stage, innovativeness and internationalization, Working Paper.