MICROFINANCE PAPER WRAP-UP: A Business to Call Her Own: Identifying, Analyzing and Overcoming Constraints to Women’s Small Businesses in Latin America and the Caribbean, by Jennifer Powers and Barbara Magnoni, Published by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB)

By Jennifer Powers and Barbara Magnoni of EA Consultants, Published by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), April 2010, 100 pages, available at: http://idbdocs.iadb.org/wsdocs/getDocument.aspx?DOCNUM=35282406

The authors of this study focused on the differences between male and female entrepreneurs in six countries in Latin America: Guatemala, Nicaragua, Colombia, Bolivia, Mexico and Peru. Specifically, they looked at the barriers that women encounter when they start a business. They also considered access to financial services and the microfinance industry. The methods the authors used to conduct research are:

1) Literature review: The authors looked for pre-existing research on Latin American female entrepreneurs.

2) Census data review: The authors compiled information from national statistics institutions in order to create a gender equity profile for each country that focuses specifically on women’s participation in the workforce, women’s business ownership and women’s access to finance.

3) Interviews: The authors conducted interviews with individual women entrepreneurs, financial institutions, NGOs and training institutes.

4) Case studies: The authors gathered detailed data on individuals by following them closely and collecting data on their business activities.

According to the authors, barriers which prevent female businesses from growing include feeling too much responsibility to stay at home to manage the household, lack of access to financial services, risk aversion manifested as reluctance to borrow money, social conventions that prevent women from deviating from a norm and a lack of education and training. The authors write that the reluctance to borrow is especially prevalent among women in lower income segments.

The authors find that women tend to reinvest their income into their households at a higher rate than men, suggesting that policy interventions to improve the growth potential and profitability of women’s businesses would not only contribute to the economic growth of their communities through their businesses but also result in increased household investment in children and education.

The authors also found that there are differences in how men and women use financial products because of women’s propensity to avoid risk. The authors claim that women sometimes fail to take advantage of opportunities that might allow them to expand their businesses, like moving their business out of their home or hiring full-time employees. Therefore, business expansion loans with lower interest and longer terms should be offered to women because such loans could enable them to graduate their microenterprises to small enterprises, a step that the authors argue has historically been more difficult for women than for men.

Additionally, according to the authors, institutions should offer contractual savings products for education and encourage men to use these products to reduce the burden of this responsibility on women. The authors also propose the introduction of insurance products that can help women manage their risks, and they suggest that efforts should be made to help women train in business administration. Lastly, the authors argue that stakeholders should promote educational opportunities which target “social conventions and gender-based perceptions of family responsibilities to encourage a more equitable division of responsibilities.”

By Julia Korn, Research Associate

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