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The bumpy road to improve women entrepreneurship

Alia El Mahdi | 07 October 2014

Egypt has invested in its female labour force since the 1960s. Yet women-led businesses remain rare. Alia El Mahdi provides insight into the underlying challenges and gives policy recommendations for the effective promotion of female entrepreneurs.

The Government of Egypt has been a major employer for women since the beginning of the 1960s. 1 However, with the implementation of the Economic Reform and Structural Adjustment Program of 1991 and the second economic reform in 2004, several changes needed to be introduced in the country’s labour market policies including reducing the yearly government employment, so as to limit the wage bill in total government expenditures. As a result, alternative solutions for employing women were needed as the government had until then been the main employer for women and this role was receding over time.

One of the main areas where womens’ role was to be boosted was in micro and small enterprises (MSE) both as self-employed entrepreneurs and employers. Thus, the beginning of the 1990s witnessed the establishment of the Social Fund for Development (SFD), which emphasized two issues: a) the importance of lending to female entrepreneurs whether as owners of start-ups or of already established enterprises; and b) lending to newly established enterprises.

After 10 years of policies that targeted MSEs and emphasized the importance of supporting female entrepreneurs, the first nationally representative empirical survey on MSE was conducted in 2003, followed by another in 2004. The main objectives were to evaluate the situation, role, dynamics, support mechanisms, challenges and success determinants of the sector. Seven years later, in 2011, a third survey was conducted to evaluate the progress in the sector and assess whether the structural changes that had taken place since 2004 had had any impact. 2

The results revealed that female entrepreneurs still played a minor role in the MSE community (only 6% in 2003, though it increased to 10% in 2011). Female-owned enterprises were smaller in terms of capital and number of workers. They tended to operate more informally, had smaller transactions, finance and subcontracting links, and were mostly involved in marginal trade activities such as selling fruit and vegetables.

Despite the efforts of the government, NGOs and the donor community to help female entrepreneurs, they are still at a disadvantage. The lack of specialized training, the fact that many have only a modest education, the social obstacles, the difficulty in accessing finance in the formal banking system or through grassroots NGOs, and the relative higher degree of informality are some of the challenges that have to be dealt with in the coming months and years if women are to play a more vigorous role in economic life. Funds provided by the government, NGOs and donors are mostly concentrated in certain regions, such as Upper-Egypt and the metropolitan cities, and only a limited number of recipients receive them. Repetitive loans to the same borrower are a widespread phenomenon, sometimes more than eight times. Knowing the borrower makes it easier to lend to her, instead of lending to new borrowers. Thus the number of loans is usually much higher than the number of borrowers.

Policy recommendations responding to these challenges could be summarized as follows:

  • Strengthening of the presence of women entrepreneurs in the different regions requires more in-depth field work that focuses specifically on women entrepreneurship in particular regions (such as rural areas) and particular activities of MSEs (see the predominant trade categories, retail and wholesale trades of foodstuffs, clothes, home appliances, and local handicrafts), and should be more targeted by using specially designed policy tools that help improve the quality of products and services and open up wider markets for MSEs in Lower-Egypt, border and remote governorates, and international markets. There are numerous success stories of extremely small female-led enterprises developing to become stronger, larger, extremely competitive enterprises in the Egyptian market as well as internationally, in areas like textiles and readymade clothes, software development, leather products and handicrafts.
  • Widening the scope of formality is a necessary condition for increasing contractual relationships between MSEs and other private sector companies, the public sector and export markets. Relaxing or easing the entry and exit procedures for the formal market and reducing them to one or two simple steps, as well as adopting simple tax systems like lump-sum taxes to accommodate for the needs of micro and small entrepreneurs is a must to help them operate formally. Cuba is a good example of a country where the adoption of simple lump-sum taxes helped to include millions of small entrepreneurs in the formal sector. South East Asian countries managed to devise incentive systems where MSEs acted as feed industries for large private sector companies (Mitsubishi in Japan, LG in South Korea) or participated in government procurement system (e.g. in Bangladesh, India and Thailand).
  • More emphasis is needed on developing craft skills, for example, in traditional handicrafts such as spinning and weaving, jewelry, glassware and pottery production, hand-made textiles, food products, etc. This could open up new horizons for the legions of illiterate or semiliterate women in Egypt, at an entrepreneurial level well within their talents. These activities have existed for hundreds of years but were mostly practiced by males. With the passage of time, fewer people were working in traditional activities. Women worked primarily in carpet and kilim weaving and jewelry. These handicrafts, if sufficiently supported, could become successful ventures for them.
  • Government should take into account the notion of planning for and establishing new specialized cluster communities in underprivileged locations (such as Qena and Luxor cities and the villages in Assuit and Sohag Upper-Egypt, as well as villages in North Sinai, Siwa, Mahallah el Kobra, Kafr el Dawar and small villages in Lower-Egypt governorates) after a needs assessment exercise, offering opportunities for female entrepreneurs to start or move there and to benefit from shared facilities and experience. These areas have been ignored for hundreds of years and thus need more support for women working on their own with no technical know-how, administrative, financial or marketing support. Providing opportunities for them to operate in such a competitive and productive environment may help them develop or expand their businesses.
  • Incentives are needed to induce more women to go into business after graduation. Access to finance should target the areas of weakness, such as female-owned enterprises and the micro enterprises (with fewer than five workers) and rural MSEs. NGOs and financial institutions that adopt a development agenda as well as providing micro and small finance should be strengthened to enable them to play a more vigorous role in lending and providing different packages of financial services.
  • Secondary school curricula should be revised drastically to provide female (as well as male) students with basic and decent market-required and technical skills, whether at technical school or academic stream levels. Entrepreneurial skill training should start at an earlier stage in the education process as foundation courses for later application. The bulk of female entrepreneurs have between 10 and 16 years of education indicating that an entrepreneurial education during these years can prepare/encourage them to start an SME. 
  • More emphasis on conditional lending linked with eradicating illiteracy is conducive to integrating more women into the productive labour force and community.

References

  1. This article is a summary of a Policy Brief entitled: “Women Entrepreneurs in Egypt: Realities and Hopes”, prepared by the author for ENID.org.eg., Cairo, March 2014.
  2. The MSE Surveys 2003/2004 were financed by FEMISE and USAID and sponsored by the ERF. The research study was entitled: The Success Determinants in Egypt 2003-2004 (Special Reference to Gender Differentials), 2005, FEMISE report, RR0418, ERF, Cairo.

Photo credit main picture: factoid / via flickr

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About the author

Alia El Mahdi

Alia El Mahdi is professor of Economics at Cairo University.

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