Tuesday 13th August 2013
The Economist Intelligence Unit, publishers of a wide range of economic forecasts and reports including the Women’s Economic Opportunity Index, last week released WEVentureScope 2013. Commissioned by the Multilateral Investment Fund, a member of the IDB Group, WEVentureScope 2013 is the first comprehensive survey of the factors affecting women entrepreneurs in the Latin America / Caribbean, or LAC, region. Nancy Lee, general manager of the Multilateral Investment Fund, describes the new index as “a much needed public information source that will help create more tailored interventions, better policy environments, and more supportive ecosystems for women entrepreneurs.” She spoke with the Global Banking Alliance for Women shortly before the July 25 launch event in Washington for WEVentureScope 2013.
(l to r) Nancy Lee, Gayle Tzemach Lemmon, Mayra Buvinic, Silvia Carbonnel, Julie Katzman, Laura Raffo, and Inez Murray at the July 25 WEVentureScope launch. Photo courtesy of Inter-American Development Bank.
Data suggests that more than almost anywhere else, women in Latin America are starting businesses because they are identifying opportunities. On average 71 percent of women-owned early-stage businesses are opportunity-based which belies the notion that the majority of the region’s entrepreneurs just need a source of income and have no other work options. This is a striking finding.
Another key finding is the defining constraint imposed on women’s businesses by their lack of access to finance. Indeed, of the five areas the WEVentureScope measures, Access to Finance was the weakest. We know that women enjoy ample access to microcredit, but growth-oriented women entrepreneurs are often unable to access more sophisticated forms of finance. On average, just over 21 percent of women entrepreneurs’ working capital and 22 percent of capital investments are financed by banks. The WEVentureScope also finds that women entrepreneurs lack access to equity financing and other instruments such as supplier credit.
Because start-up and business growth are multidimensional concepts, we had some very spirited debates about the categories, indicators, and subindicators we should use. We spent quite a bit of time refining the Access to Finance indicators, particularly the SME finance indicators, because we know how important access to such capital is for a woman’s business growth. Many of the indicators draw on the work of other respected international organizations, and we constructed new datasets, too — ones we believe will be a valuable contribution to other researchers.
In some instances, it was challenging to use third-party data, such as the World Bank’s Doing Business indicators, which are not gender-disaggregated. But we also used gender-disaggregated resources such as ECLAC, UNESCO, the World Bank’s Findex and Enterprise Surveys, and the Global Entrepreneurship Monitor. I cannot reiterate enough how important and valuable gender-disaggregated information is, particularly from commercial banks in the region. I would encourage all Alliance member banks not only to collect gender-disaggregated data but to monitor it constantly and use it as a key management tool. What’s more important than a clear understanding of clients’ needs, financial behaviors, and growth prospects?
The MIF intends to launch this tool more widely throughout the region in the coming months and use it to create dialogue with policymakers. Our survey found that more than half the countries, for example, do not have comprehensive regulation supporting microenterprises and SMEs, let alone regulation for women business owners. In no country included in the index did regulation explicitly consider women-owned SMEs. Not surprisingly, we found that high-performing WEVentureScope countries also had more competitive economies generally. But even the highest-scoring countries have room for improvement in the Access to Finance measures. On a scale of 0-100, where 100 equals the most favorable score, the highest-ranking country scored 57.
We see great potential to expand this tool globally. A global tool will enrich the conversation about the types and intensity of barriers affecting women’s business growth worldwide, and two other MIF indices that started out as LAC-only publications have since gone global or multi-regional. But the Alliance can use WEVentureScope now as a tool in conversation with skeptics about the necessity of providing better access to SME finance for women entrepreneurs. WEVentureScope can provide a starting point for discussion about the constraints facing women entrepreneurs, be they in Latin America or elsewhere, and about the value the Alliance brings to commercial banks — the know-how to serve a very untapped market of credit-seeking business women.
— As told to the Global Banking Alliance for Women