Where are Bangladesh’s Businesswomen?

June 8, 2011

By Nina Merchant-Vega

Since the 1980s, microfinance institutions in Bangladesh, such as the Grameen Bank, have touted the success of women microentrepreneurs in starting and operating thousands of microenterprises throughout the country. While this is certainly an achievement, Bangladeshi women have not achieved the same level of success in the small and medium-sized enterprises (SME) sector.

In Bangladesh, male small business owners far outnumber female business owners, despite some recent progress. A business owner in Bogra, northern Bangladesh. Photo by Geoffrey Hiller.

The importance of SMEs to overall growth in an economy is well-known. Although the exact definition of SMEs varies from country-to-country, they are generally much larger – in terms of both assets and number of employees – than microenterprises. SMEs are often lifelines for larger firms – including foreign-owned firms – supplying them with raw materials, parts, and services. They are also more productive than microenterprises, driving employment and competition.

On an individual level, starting and operating an SME requires not only entrepreneurial spirit and start-up capital (which many microentrepreneurs have), but also managerial and logistical expertise. In addition, in cumbersome business environments like Bangladesh, starting and operating an SME often requires a business person to be well connected to bureaucrats or at least to networks who can access them. Women entrepreneurs in countries like Bangladesh frequently lack access to such expertise and networks, limiting their ability to become SME entrepreneurs. Moreover, expectations of women’s role in the family as wives, mothers, and homemakers may limit their ability to pursue economic opportunities outside of the home.

In order to understand these issues more deeply, The Asia Foundation has begun to closely examine the gender disaggregated data of its Economic Governance Indices (EGI) in Bangladesh and other countries. EGIs are composite indexes, based on a 100-point scale that scores the economic governance of each sub-national unit in a country. The data to construct each of the EGIs comes from a comprehensive, representative SME survey. By examining the gender-disaggregated raw data, we can determine systematic differences between men and women entrepreneurs to better understand the complex challenges that women entrepreneurs face.

So far, we have just begun to examine the data in Bangladesh and Indonesia, focusing mostly on firm-level and household-level demographic data. Most of these preliminary results are in line with what we expected. For example, it is no surprise that in Bangladesh, male SME entrepreneurs far outnumber female SME entrepreneurs. According to the 2010 Bangladesh EGI data (see Figure below), only 69 of the 3,800 firms in the sample have at least one female owner. This means that less than two percent of firm owners in the country are women. According to leading experts, most SMEs in the country are sole proprietorships or partnerships formed around family businesses. Tradition dictates that the male head of the household owns most of the family assets, including family businesses.

Similarly, as the next figure shows, female SME ownership across districts is very uneven, with smaller districts like Barisal and Jessore having a higher proportion of female owner than large cities such as Dhaka, Chittagong, and Khulna. While we do not know for sure why this is the case, one hypothesis is that women face additional barriers to entrepreneurship in Bangladesh’s mega cities – such as the high price of land, weak urban governance, and limited access to effective networks.

Additionally, on average women-owned firms are younger than male-owned firms, at approximately 11 years and 13 years respectively. Although the sample size for the female firms is small, the evidence suggests that this is a statistically significant difference. This reflects the relatively recent rise of female entrepreneurship in the country. According to the Strategic Foresight Group, an India-based think tank, women’s formal labor force participation in Bangladesh has increased 2 percent since 2005, adding over 1 million women to the labor force. This increase in labor force participation is due primarily to the absorption of women workers into traditionally male-dominated fields such as frozen shrimp enterprises. However, there has also been a rise in the number of women entrepreneurs, according to the Bangladesh Women’s Chamber of Commerce and Industry. In fact, a recent study by the group finds that women entrepreneurs are more likely to hire other women, thereby increasing employment opportunities. Our own data bears this out. According to our analysis, not only do women entrepreneurs on average have one more employee than men entrepreneurs, but they are much are more likely to hire female employees. On average, women entrepreneurs have 1.3 female employees while men have only 0.12 female employees. This significant difference gives credence to the notion that women entrepreneurship not only empowers women owners, but expands opportunities for all women.

Surprisingly, the data did not support the notion that women entrepreneurs are involved in different sectors than men. For example, women in the sample were just as likely to be involved in manufacturing as men, in contrast to the widely-held notion that women are more likely to be involved in services or retail than men. There was, however, large and significant difference in revenue generation. As the next figure shows, average sales per worker at all male-owned firms in 2010 was more than 1 million Taka, while at firms with at least one female owner it was around 600,000 Taka. This finding corroborates evidence from a 2008 report by the Bangladesh Women’s Chamber of Commerce, which found that most women entrepreneurs only sell their products locally and that 43 percent sell their products at lower prices than their male counterparts in order to compete effectively. This not only highlights the fact that women are not well connected to either markets or networks to advance their businesses, but that they tend to compete in a narrower range of commercial enterprises – such as handicrafts, dress-making, and fish-drying – which produces products that have less value-added, so it is difficult for them to sell beyond local markets.

Lastly, the data shows that there are surprisingly few demographic differences between men and women entrepreneurs. For example, women and men entrepreneurs are equally as likely to be married, have similar household sizes, and similar household income. The only significant and important difference is in the highest level of educational achievement attained. As this figure shows, 83 percent of women entrepreneurs have at least a junior secondary education or higher compared to 65 percent of men entrepreneurs. This indicates that education may play a greater role in women’s entry into SME sector than for men.

Interestingly the data also show that women entrepreneurs have better educated fathers on average than their male entrepreneurs, with 54 percent of women entrepreneurs’ fathers completing at least junior secondary school, compared with 34 percent of men entrepreneurs’ fathers. These findings indicate that successful women entrepreneurs may have greater support from male family members, who through education, support women’s economic empowerment.

While these findings are preliminary, they are useful in painting a picture of women’s SME entrepreneurship in Bangladesh. As we continue with our analysis, we hope to have a deeper understanding, not just of the demographic and firm-level differences between men and women entrepreneurs, but also how they each experience the business environment. This will help us better understand what policy-makers and institutions can do to help improve and expand entrepreneurship and economic opportunities for women throughout Bangladesh.

Nina Merchant-Vega is The Asia Foundation’s assistant director for the Economic Reform and Development program. She is a co-author of the new book, “Innovations in Strengthening Local Economic Governance in Asia,” published by The Asia Foundation. She can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

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