Expanding Women’s Commercial Economic Activities
Microfinance services (microcredit, microsavings, and microinsurance) help bridge the gap between poor households and formal financial services by smoothing cash flow—particularly in times of shock—and building assets. One major selling point of microfinance, which helped elevate it to the status of being the United Nations’ "weapon against poverty and hunger," is its presumed ability to empower women by increasing their financial security, self-esteem, and . However rigorous studies of the impacts of microfinance suggest that its services help to improve the lives of some women, but not all. Microfinance helps women who have , and large social networks. Although microfinance exhibits positive effects on its borrowers, these effects are not transformative. Microcredit may generate additional income for families and increase women's formal labor force participation, but the evidence is mixed: Some research points to women's improved agency in terms of decreasing fertility outcomes, and others find a lack of . Even after an influx of capital, often female-owned microenterprises show , households with female enterprises benefit as much as households with male enterprises. Expanding women’s commercial economic activities worldwide therefore remains a mixed promise, despite the large investment in providing microfinance services for the poor.
What We Can Do to Foster Women’s Entrepreneurship?
Microfinance alone that often constrain women’s entrepreneurial opportunities. Programs that increase women’s social networks and that train adolescent girls before they enter the labor market have shown success in increasing women’s entrepreneurship.
Providing a . Debt contracts that require early repayment discourage risky investment and limit the potential impact of microfinance on microenterprise growth and household poverty.
Although both girls and boys face challenges in the labor market, adolescent girls face additional constraints due to restrictive social norms and expectations. Early marriage, childbirth, and family duties restrict girls’ opportunities and incentives to invest in their education, which adversely impacts their labor market participation. Job training coupled with life skills training for adolescent girls can empower women at earlier ages by .
Using financial incentives to motivate work and effort has been tested extensively in well-established companies in high-income countries, but how they affect (micro-) entrepreneurs in low-income countries is largely an open question. Standard financial incentives used to motivate employees in developed countries may actually crowd out the intrinsic motivation of micro-entrepreneurs in poor countries. For example, (when their performance was measured by publicly displayed stars, allowing for social comparisons with neighboring salons), rather than by financial incentives. While it is unclear how generalizable the specific findings are, it is important to note that non-financial motives can affect entrepreneurship and performance even among the very poor who face severe financial constraints.