It was reported in an article on Pakistan’s online The News portal entitled ‘Women face hurdles to developing business’ [1] that successful women microentrepreneurs who have the support of microfinance loans seldom develop their ventures into small or medium-sized businesses ‘due not only to gender-specific impediments’ but also ‘to their inability to access institutions established to facilitate them’. The report was authored by senior commerce reporter, Mr Mansoor Ahmed, at The News, Lahore. This conclusion was based on a study conducted by The News which revealed that in cities such as Sialkot and Gujranwala, many male entrepreneurs who started their businesses at a micro level subsequently ‘graduated’ and developed their enterprises into medium or large ones. The News found that such ‘graduation’ rarely occurs in relation to women microentrepreneurs, subject to a small number of exceptional cases. Specific details of the study conducted by The News are not currently available in the public domain.
Indeed, some of these exceptional cases may be deceiving as they relate to women ‘from the affluent class’ who ‘are doing a flourishing business’ partly because of the status and ‘influence exerted by their male family members’. The article in The News observes that whilst this ‘is not meant to deny [these women] credit for their success’ but the reality is that it is ‘almost impossible for a woman without influence in Pakistan to expand her business beyond a certain limit’.
The News further reported that efforts to overcome this particular gender related challenge ‘is also flawed’. The Lahore Chapter of the Federation of Pakistan Chambers of Commerce and Industry [2] recently organised a roundtable conference of women entrepreneurs who are on the cusp of starting a small business. Almost all the participating women at the conference ‘were from rich families and did not lack resources’ according to The News and ‘genuine women entrepreneurs’ who started ‘from scrap through microfinance’ were notably missing from the conference.
In Pakistan, it is conventionally understood that a microenterprise is one ‘under which business is managed by a single person’ and which can be started up with an amount as little as Rs20,000 (approximately USD 238). However, the International Labour Organisation [3] and the State Bank of Pakistan [4] consider microenterprises to include businesses ‘run by a small team, led by an entrepreneur, but which operate on a relatively bigger scale’.
Of 1.6 million microfinance borrowers in Pakistan, around 100,000 enterprises are exclusively owned by women. According to research conducted by the Civil Society Human and Institutional Development Programme for the European Union in 2005, 26 to 32 per cent of microfinance borrowers drop out of the loan after one year. About 63 per cent of microborrowers drop-out because of ‘organisational design and policy’ in relation to particular microloan products where the loan size and payment schedules were considered unsuitable. Approximately 16 percent of borrowers drop out because of idiosyncratic unexpected events while 15 percent drop out because they no longer require microloans.
In the latter category, some microborrowers abandon their microcredit facilities when they become fairly successful and ‘generate sufficient income as retained earnings’, thus becoming ‘self-sufficient’. The News reports that within this group are a significant number of successful women microentrepreneurs, numbering over 13,000 in Pakistan, who need help to pursue further growth in their individual ventures.
The News further reported that about 70 percent of small and medium enterprises (SMEs) in Pakistan prefer to borrow from friends and families, from whom funds can be ‘easily and immediately available’. Thus if banks want to offer loans to such enterprises, ‘they must compare their product with the ones offered by friends, families or other informal channels’. Key characteristics of loans provided informally include quick access, reliability, cheap or free loans and small transaction amounts. The News noted that entrepreneurs will ‘return to better-known sources’ for funding if banks cannot offer competitive products, a phenomenon that ‘further limits the amount of investment and growth that can take place in an SME’.
Women entrepreneurs in the SME sector in Pakistan are most likely to age between 20 and 49 years and possess a graduate or vocational degree at the least. They are computer literate, have one or two children and typically start-up the business on their own. It has been established through various studies, details of which were not provided in The News report, that women entrepreneurs in Pakistan with no assets of their own lack access to finance, markets, training and potentially helpful networks.
Gender related issues [5] – [10] and information about microfinance in Pakistan [11] – [14] have been captured in previous Microcapital.Org publications, some of which have been set out in the Bibliography section below.
By Chinq Yee Chong, Research Assistant
Bibliography
[1] Article on Pakistan’s The News portal entitled ‘Women face hurdles to developing business’: http://www.thenews.com.pk/print1.asp?id=202572
[2] The Lahore Chapter of the Federation of Pakistan Chambers of Commerce and Industry: www.fpcci.com.pk/
[3] The International Labour Organisation: www.ilo.org/
[4] The State Bank of Pakistan: www.sbp.org.pk/
[6] MICROCAPITAL STORY: Study Reveals Ghanaian Women Still Face Challenges Accessing Microfinance
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