#3 POLICY LESSONS ON SUPPORTING WOMEN ENTREPRENEURS GENDER INNOVATION LAB FEDERATION EVIDENCE SERIES GENDER INNOVATION LAB FEDERATION The Gender Innovation Lab (GIL) Federation is a World Bank community of practice coordinated by the Gender Group that brings together the Bank’s five regional GILs: Africa (AFR), East Asia and Pacific (EAP), Latin America and the Caribbean (LAC), Middle East and North Africa (MNA), and South Asia (SAR). Together, they are conducting impact evaluations of development interventions to generate evidence and lessons on how to close gender gaps in human capital, earnings, productivity, assets, voice and agency. With over 188 impact evaluations in 66 countries completed to date, the GIL Federation is building the evidence base for governments, development organizations, and the private sector to increase uptake of effective policies that address the underlying causes of gender inequality. Entrepreneurship can be a pathway to employment Traditional business training programs focused on and economic empowerment for women. Over half of teaching a set of recommended business practices the women in developing countries are or aspire to be show positive but small effects on business entrepreneurs, but most of them run subsistence- performance, with even smaller effects for women oriented micro-businesses that are not seen as key entrepreneurs, particularly where their opportunities are drivers of innovation and growth.1 Among formal firms, constrained by social norms. Socio-emotional skills the share of women-led businesses decreases as the training programs, which focus on changing the way size of the firm increases.2 Multiple factors—including entrepreneurs think about their business, deliver better lack of skills, networks, and access to finance, results for both men and women. technology, and markets—constrain women’s decision to become entrepreneurs and affect their choices The Africa GIL led an influential randomized controlled concerning which sector to enter, how much to put into trial (RCT) in Togo where personal initiative training, an their firms, and which business practices and example of socio-emotional skills training focused on technology to adopt. Contextual factors, such as social developing a proactive, future-oriented mindset, was norms, access to childcare, and risk of gender-based compared with traditional business training and a violence, also contribute to the gender gap in firm control group that did not receive any training.5 Personal performance documented by the Africa GIL3 and the initiative training was found to have much larger effects than traditional business training on the performance of EAP GIL.4 The GIL Federation is generating rigorous both men and women-led businesses. Over two years, evidence around the world to understand what women entrepreneurs offered personal initiative training works, and what does not, in addressing the increased their profits by 40 percent in comparison to differential constraints restricting the growth of the control group. Women offered traditional business women-led firms. This note presents evidence on five training increased their profits by only 5 percent, an key findings. effect that was not statistically significant. The personal initiative training was highly cost effective, paying for itself within one year. Moreover, it worked equally well for women with different levels of human capital, as FINDING 1. SOCIO-EMOTIONAL SKILLS shown in a follow-up article by the Africa GIL.6 These TRAINING CAN BE MORE EFFECTIVE THAN findings have influenced World Bank operations, with TRADITIONAL BUSINESS TRAINING IN around 35 projects in 24 countries implementing or BOOSTING WOMEN-LED BUSINESSES planning to implement a variant of personal initiative training. selected to receive either an additional capital package The Africa GIL also conducted a pair of RCTs to (a lump-sum cash grant), a psychosocial package evaluate psychology-based training programs for (socio-emotional skills training and community women entrepreneurs in Ethiopia.7 One RCT indicates sensitization on aspirations and social norms), or both training had large positive effects on profits after one packages. The control group received only the year, but effects were not statistically significant after government cash transfers. Results show all treatment two years. The other RCT finds training had no effects arms increased earnings derived from women-led on business outcomes. This research argues that the income-generating activities, particularly off-farm self- quality of the teachers was one of the key differences employment and livestock enterprises.12 The packages between the two RCTs, with low-quality trainers that included psychosocial interventions were the most associated with low effects. cost-effective. The LAC GIL conducted an RCT in Mexico to evaluate the effects of a program combining personal initiative FINDING 3. INTERVENTIONS THAT training and traditional business training on the ENCOURAGE WOMEN TO SAVE CAN IMPROVE performance of women micro-entrepreneurs.8 The study finds large effects of combined training on the business THE PERFORMANCE OF WOMEN-LED outcomes of women-led firms. However, another RCT in BUSINESSES Jamaica finds no effects of combined personal initiative In the context of expanding branchless banking and traditional training, and only short-term effects on services in Indonesia, the EAP GIL conducted an RCT men entrepreneurs who participated in a training to evaluate the impact of supply and demand-side program focused exclusively on personal initiative.9 The interventions to support financial inclusion for women GIL Federation is currently testing variations in entrepreneurs. The study took place in 401 villages in programs (e.g., inviting both women and their husbands East Java where branchless banking services had been to training) and complementarities with other recently introduced. To assess supply side constraints, interventions (e.g., financial access and networks) in in half of the villages, the incentive paid to banking several countries to understand which contexts and agents for each new customer was increased five times conditions best foster personal initiative training. to motivate agents to be more proactive in outreach campaigns. To assess demand side constraints, half of the listed women entrepreneurs in each village were FINDING 2. MULTIFACETED POVERTY invited to a business and financial literacy training and GRADUATION PROGRAMS CAN FOSTER mentoring program, which was tailored to the context INCOME GENERATING ACTIVITIES AMONG and level of the entrepreneurs. THE POOREST WOMEN Although neither intervention led to large uptake of the Programs targeting the poorest women in populations agent banking products, both interventions boosted the with a bundle of interventions show promising effects on profits of women-led businesses. The training increased women’s income-generating activities. Bundles usually profits by 15 percent compared to the control group, include the transfer of a large agricultural asset, a likely coming from an increase in women’s savings, the monetary stipend, training support, health support, value of their business assets, their use of good encouragement to save, and life skills training. A paper business practices, and their decision-making authority. combining RCTs from six countries finds significant The high agent incentives increased women’s profits by effects on women’s earning and economic activity 12 percent, possibly due to the signal of the importance (mainly rising livestock),10 and a study in Bangladesh of savings or of a woman-friendly business finds that effects are large at the community level and environment.13,14 persistent even after seven years.11 There is also evidence that combining access to The Africa GIL led an RCT in Niger to unbundle the savings instruments with other interventions can be effects of these multifaceted antipoverty programs. It effective. examined a program that provided women cash transfers from the government and a core bundle of In Malawi, the Africa GIL conducted an RCT to evaluate interventions (e.g., coaching, savings groups, the effects of a program combining business entrepreneurship training). Participants were randomly registration support with an information session at a bank, including the offer of a business bank account. Another way to increase women’s ability to obtain The combination of the two interventions led to a higher medium-sized loans is giving women more control over use of formal financial services, a 28 percent increase in assets. An RCT by the Africa GIL in rural Rwanda shows enterprise sales, and a 20 percent increase in profits for that granting joint property rights over land helped women-owned firms.15 Business registration alone did women obtain credit to grow their businesses.18 The not generate positive results. A large percentage of study finds a 19-percentage-point increase in the women chose to register their business but did not likelihood of women making soil conservation continue with additional registration for taxes. investments—twice the increase seen for men. With this evidence in hand, the pilot was scaled up nationally. In Tanzania, the Africa GIL conducted an RCT to study the effects of combining mobile savings accounts for women micro-entrepreneurs with business training.16 FINDING 5. ENCOURAGING WOMEN The study randomly allocated 4,000 women ENTREPRENEURS TO CROSS OVER TO MALE- microentrepreneurs into three groups: 1,000 were invited to the mobile savings intervention only, 2,000 DOMINATED SECTORS COULD INCREASE were invited to both the mobile savings and the THEIR PROFITS business training intervention, and 1,000 served as a Women entrepreneurs around the world tend to cluster control group. Women assigned to receive both in low-paying industries and sectors. A study by the interventions saved almost four times more than the Africa GIL provides evidence that women in female- control group. The mobile savings interventions also led concentrated sectors earn lower profits than women to an increase in women’s intra-household decision and men in male-concentrated sectors.19 A report making power in relation to their husbands. prepared by the Africa, EAP, and LAC GILs describes the characteristics of women who cross over to male- dominated sectors using data from 10 countries and a FINDING 4. INNOVATIVE FINANCIAL global survey of entrepreneurs.20 It provides non-causal SOLUTIONS COULD FACILITATE ACCESS TO evidence that women in male-dominated sectors have CAPITAL FOR WOMEN ENTREPRENEURS greater profits than women in female-concentrated sectors. The main factors associated with crossover are Women entrepreneurs own fewer assets that can be spousal support, access to mentors and role models, used as collateral for business loans. In Ethiopia, the information and training, and access to capital. Africa GIL and the World Bank Finance, Competitiveness and Innovation Global Practice (FCI) Two Africa GIL qualitative studies in Uganda and partnered with a leading fintech company and two Ethiopia reveal that women entrepreneurs tend to Ethiopian microfinance institutions (MFIs) to introduce a confine themselves to traditionally female-concentrated psychometric credit scoring test. It is an innovative sectors, not because of a lack of skills or access to alternative to traditional collateral, designed to ease capital, but rather due to a lack of information and social women’s access to larger business loans by predicting factors.21 The Africa GIL conducted an RCT in the the likelihood that an entrepreneur will repay a loan. Republic of Congo to test whether providing information on trade-specific earnings to young women could In the initial pilot, customers who scored at a high encourage them to cross over to male-dominated threshold on the test were seven times more likely to trades. The study finds that women in the treatment repay their loans compared to lower-performing group were 29 percent more likely to apply to customers. Following this proof of concept, the traditionally male-dominated trades than women in the psychometric test was scaled up by a second MFI as control group who did not receive the information.22 an alternative to asset collateral for women entrepreneurs. It provided unsecured loans of up to A study by the LAC GIL in Mexico used data from the $7,500 for women entrepreneurs who scored highly on baseline survey of an RCT to uncover the factors that the test. The RCT that accompanied this scale-up finds enable women to cross over to more profitable, male- that psychometric-appraised loans dramatically dominated sectors.23 The study finds that men mentors increased women entrepreneurs’ access to credit, and role models, cognitive skills, and education are especially formal borrowing, and the survival of their correlated with crossovers. The RCT evaluated the firms through the COVID-19 pandemic, although effects of a program combining personal initiative impacts on profits were muted.17 training and traditional business training for almost 4,000 formal and informal women entrepreneurs. 24 crossover to male-dominated sectors and increased Results show that the training encouraged women’s sales and profits for women-led businesses. FOR MORE INFORMATION, PLEASE CONTACT Diego Ubfal dubfal@worldbank.org 1818 H St NW Washington, DC 20433 USA https://www.worldbank.org/en/topic/gender ACKNOWLEDGMENTS This brief is a product of collaboration between the World Bank Gender Group and the Gender Innovation Labs. It was prepared by Daniel Halim, Diego Ubfal, and Rigzom Wangchuk with key inputs from Diana Arango, Elizaveta Perova, and Rachael Pierotti. It was copy-edited by Leslie Ashby. Other contributors include Lourdes Rodriguez Chamussy, Maria Emilia Cucagna, Isis Gaddis, Markus Goldstein, Jacobus Joost De Hoop, Forest Brach Jarvis, Hillary C. Johnson, Lili Mottaghi, Michael B. O'Sullivan, Laura B. Rawlings, Javier Romero, Jayati Sethi, and Emcet Tas. The World Bank GILs and the GIL Federation are supported by the Umbrella Facility for Gender Equality (UFGE), a multi-donor trust fund administered by the World Bank and supported with generous contributions from Australia, Canada, Denmark, Finland, Germany, Iceland, Ireland, Latvia, the Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom, United States, the Bill and Melinda Gates Foundation, and the Wellspring Philanthropic Fund. ENDNOTES 1 Elam, Amanda, Karen Hughes, Maribel Guerrero, Stephen Hill, and Catharina Nawangpalupi. 2021. Women’s Entrepreneurship 2020/21 - Thriving Through Crisis. Global Entrepreneurship Monitor. 2 Ubfal, Diego. 2023. What Works in Supporting Women-Led Businesses? World Bank Group Gender Thematic Notes Series. Washington, DC: World Bank Group. 3 World Bank Group. 2019. Profiting from Parity: Unlocking the Potential of Women's Business in Africa. Technical Report. World Bank. 4 The evidence from Southeast Asia indicates that gender gaps in performance are observed for microbusinesses but not for SMEs. World Bank. 2021. Enterprising Women: Toward Equal Business Opportunity in Southeast Asia. Technical Report. World Bank. 5 Campos, Francisco, Michael Frese, Markus Goldstein, Leonardo Iacovone, Hillary Johnson, David McKenzie, and Mona Mensmann. 2017. Teaching personal initiative beats traditional training in boosting small business in West Africa. Science, 357 (6357), 1287-1290. 6 Campos, Francisco, Michael Frese, Markus Goldstein, Leonardo Iacovone, Hillary Johnson, David McKenzie, and Mona Mensmann. 2018. Is Personal Initiative Training a Substitute or Complement to the Existing Human Capital of Women? Results from a Randomized Trial in Togo. AEA Papers and Proceedings: 108: 256-261 7 Alibhai, Salman, Niklas Buehren, Michael Frese, Markus Goldstein, Sreelakshmi Papineni, and Kathrin Wolf. 2019. Full Esteem Ahead? Mindset-Oriented Business Training in Ethiopia. World Bank Policy Research Working Paper 8892. 8 LACGIL. 2021. Promoting Women Entrepreneurs in Mexico. Technical Report. World Bank’s LAC Gender Innovation Lab and International Finance Corporation. 9 Ubfal, Diego, Irani Arraiz, Diether Beuermann, Michael Frese, Alessandro Maffioli, and Daniel Verch. 2022. The Impact of Soft-Skills Training for entrepreneurs in Jamaica. World Development 152: 105787. 10 Banerjee, Abhijit, Esther Duflo, Nathanael Goldberg, Dean Karlan, Robert Osei, William Pariente, Jeremy Shapiro, Bram Thuysbaert, and Christopher Udry. 2015. A multifaceted program causes lasting progress for the very poor: Evidence from six countries. Science 348 (6236): 1260799. 11 Bandiera, Oriana, Robin Burgess, Narayan Das, Selim Gulesci, Imran Rasul, and Munshi Sulaiman. 2017. Labor Markets and Poverty in Village Economies. The Quarterly Journal of Economics 132(2): 811 870. 12 Bossuroy, Thomas, Markus Goldstein, Bassirou Karimou, Dean Karlan, Harounan Kazianga, William Pariente, Patrick Premand, Catherine Thomas, Christopher Udry, Julia Vaillant, and Kelsey Wright. 2022. Tackling psychosocial and capital constraints to alleviate poverty. Nature 605, 291–297. 13 Buvinic, Mayra, Hillary Johnson, Hillary, James Knowles, Gianmarco Leon, and Firman Witoelar. 2020. Can boosting savings and skills support female business owners in Indonesia? Evidence from a Randomized Controlled Trial. The World Bank. 14 Buvinic, Mayra, Erika Deserranno, Hillary Johnson, Elizaveta Perova, and Firman Witoelar. 2019. Unequal Ventures: Results from an Endline Study of Gender and Entrepreneurship in East Java, Indonesia. Center for Global Development. 15 Campos, Francisco, Markus Goldstein, and David McKenzie, David. 2023. How should the government bring small firms into the formal system? Experimental evidence from Malawi.” Journal of Development Economics 161:103045. 16 Bastian, Gautam, Iacopo Bianchi, Mayra Buvinic, Markus Goldstein, Tanvi Jaluka, James Knowles, Joao Montalvao, and Firman Witoelar. 2018. Are Mobile Savings the Silver Bullet to Help Women Grow Their Businesses? Gender Innovation Lab Policy Brief No. 29, World Bank. 17 Alibhai, Salman, Rachel Cassidy, Markus Goldstein, and Sreelakshmi Papineni. 2022. Evening the Credit Score? Impact of Psychometric Loan Appraisal for Women Entrepreneurs. Working Paper. 18 Ali, Daniel Ayalew; Deininger, Klaus; Goldstein, Markus. 2014. Environmental and gender impacts of land tenure regularization in Africa: Pilot evidence from Rwanda. Journal of Development Economics, 110, pp.262-275. 19 Goldstein, Markus, Paula Gonzalez Martinez, and Sreelakshmi Papineni. 2019. Tackling the Global Profitarchy. Gender and the Choice of Business Sector. World Bank Policy Research Working Paper 8865. However, a report by the EAP GIL indicates that sector of activity explains little, if any, of the gender gap in micro-enterprise profits in Indonesia, Lao PDR, and Vietnam. World Bank. 2021. Enterprising Women: Toward Equal Business Opportunity in Southeast Asia. Technical Report. World Bank. 20 World Bank. 2022. Breaking Barriers: Female Entrepreneurs Who Cross Over to Male-Dominated Sectors. The World Bank. 21 Goldstein, Markus and Fannie Delavelle. 2020. GIL Top Policy Lessons on Empowering Women Entrepreneurs. Gender Innovation Lab, World Bank 22 Gassier, Marine, Lea Rouanet, and Lacina Traore. 2022. Addressing Gender-Based Segregation through Information : Evidence from a Randomized Experiment in the Republic of Congo. World Bank Policy Research Working Paper 9934. 23 Cucagna, Emilia, Leonardo Iacovone, and Eliana Rubiano-Matulevic. 2020. Women Entrepreneurs in Mexico: Breaking Sectoral Segmentation and Increasing Profits. Gender Innovation Lab, World Bank. 24 LACGIL. 2021. Promoting Women Entrepreneurs in Mexico. Technical Report. World Bank’s LAC Gender Innovation Lab and International Finance Corporation.