BY Dikshya Singh
Women entrepreneurs face multiple barriers to scale up their businesses
International trade is widely recognised as a catalyst for economic growth and job creation. Studies have shown that countries with higher GDP growth rates typically experience a more significant increase in trade as a proportion of their overall output. This trend also extends to individual firms, with exporting companies tending to be larger, more productive, more capital-intensive, and offering higher wages than those focused solely on domestic markets. Exporting small businesses have been found to expand their needs, innovate, and increase profits. As such, encouraging the participation of women-led firms in international trade not only enhances the capacity of women entrepreneurs but also makes economic sense. Although women-led firms in Nepal face significant challenges when it comes to venturing into the export market, helping them access necessary information could be the simplest yet most significant policy intervention to support women entrepreneurs.
Businesses owned and led by women tend to be smaller, operating in less profitable sectors and do not usually venture into international trade. In addition to the challenges faced by small businesses in general, social and cultural barriers caused by gender discrimination further inhibit the participation of women-owned or -led businesses in international trade. Even as entrepreneurs, women face difficulty in accessing information about markets, innovations, technology, and credit. Moreover, in the modern trading regime characterised by the proliferation of trade-impeding non-tariff measures, women are further discouraged from participating in cross-border trade.
Exporting products to foreign markets requires a certain level of expertise and efficiency in navigating the requirements of the destination markets and the buyers there. This involves gathering intelligence about overseas markets and establishing contacts with buyers in the destination market. Accessing markets is particularly difficult, as marketing and networking required to establish business relationships are not readily available to women due to restrictions related to time and mobility, as well as limited access to information, among other factors.
Exporting necessitates scaling up businesses, which, in turn, requires additional capital. Small businesses, particularly those owned by women, have a hard time generating the necessary capital. Women entrepreneurs are often hesitant to enter international trade due to a lack of information, difficulties in accessing capital, and the risks involved. Even for those engaged in export activities, logistics, transport, and customs procedures make the export process daunting. As a result, only a few women-led firms export due to the costs associated with exports and limited information about the market. Data on women exporters are not available but the World Bank’s Enterprise Survey 2013 shows that the proportion of women-managed enterprises engaged in export is less than one percent.
It is not that these issues are exclusively faced by women-led firms. Men-led ones also face a similar predicament, especially when they are small. Most of the small businesses lack sufficient access to the finance, technology, expertise and network required to navigate overseas markets. However, women-led firms are more vulnerable and are less likely to withstand external shocks as they face limited access to productive resources (finance and technology), and distribution and information network. For example, for most women entrepreneurs, their households are their primary focus, so they have limited time to look for information on overseas markets or to establish networks required for export. Similarly, the threat of unwanted sexual advances while dealing with men and the stigma attached to socialising with men also discourage women from establishing networks. These sorts of difficulties are not faced by the men who own small businesses. The difficulty faced by women entrepreneurs in establishing and expanding business entities has been well-documented in economic literature. Concerted policy efforts are, therefore, necessary to improve women's participation in trade and provide them with more benefits from business and trade.
Although the rise of digital communication has made searching and contacting buyers easier, not all small businesses are adept at that. Half of the entrepreneurs surveyed did not even have email addresses and relied on instant messaging applications such as Facebook Messenger, Viber, etc. This indicates that business communication could be a problem for many, especially due to the language barrier. Navigating the export market for buyers requires a certain level of expertise. Since entrepreneurs may not possess the expertise and their constrained resources prevent them from hiring dedicated personnel or hiring consultants who could help launch their products, poor market intelligence is a major obstacle for women-led firms.
Even when there are no explicit discriminatory provisions, economic policies have an unintended discriminatory impact on women. For example, more women entrepreneurs are engaged in food processing businesses, and they are the most affected by the lack of accredited laboratories in Nepal. Since these businesses do not have sufficient lobbying capacity, their demands have been left unheard, discouraging them from selling their products outside Nepal. In the absence of proper advocacy, these issues have remained in the footnotes.
Women entrepreneurs are generally risk averse and given the limited information about the workings of the foreign markets, they would rather stay in the domestic market. A study done by South Asia Watch on Trade, Economics and Environment (SAWTEE) and The Asia Foundation found that one of the major reasons cited by women entrepreneurs for not exporting is the lack of information about the foreign market. Furthermore, the yet-to-be-released study found that in some cases, the perceived cost of exporting and accessing foreign markets may even outweigh financial gains from exporting, at least in the short run, discouraging women entrepreneurs from exporting. Moreover, exporting is procedurally intensive. Besides all the regulatory requirements related to certifications, exporters need to get an EXIM Code to be able to export. To obtain the Code, exporters (or even importers) need to deposit Rs 300,000. The amount of money is not meagre, especially for the small businesses that are surviving order-to-order, which further discourages them from venturing into export markets.
Even among women entrepreneurs, not all entrepreneurs are on an equal footing. Relatively less-educated entrepreneurs, mostly operating informal entities away from urban centres, could find establishing and accessing export distribution channels and contacting overseas customers more difficult than the ones hailing from urban areas and from better social backgrounds. Similarly, a couple of women entrepreneurs from relatively rural areas, who were interviewed for the study, did not even fathom the rationale to get their products (incense sticks in one case and bamboo wares in another) tested by laboratories and the fumigation requirement for export. They assumed that since they source all their inputs from forests, their products were inherently organic and hence did not need testing certificates and fumigation.
Moreover, the language barrier, a lack of command of the English language, poses a significant barrier when it comes to communicating with buyers abroad. Thus, instead of venturing into foreign markets on their own, women entrepreneurs seek export houses to undertake the export of their products. Although such arrangements are useful, entrepreneurs lose out on potential access to foreign technology transfer that could have resulted from direct collaboration. Similarly, relying on export houses also discourages exporters from getting formally registered as exporters, thus preventing them from accessing facilities provided by the state and, at times, hindering their expansion.
It is believed that the adoption of digital communication and the internet in accessing information could help patch the information barrier to a great extent. However, the digital adeptness of entrepreneurs - how well-versed the entrepreneurs are in navigating the digital maze to churn out useful information - is crucial in tapping the potential benefits provided by digital advances. In Nepal, the internet penetration rate is about 38% but the quality and reliability of the service are questionable, more so in rural and semi-urban areas. Moreover, even with access to reliable internet service, women entrepreneurs who must manage the business, in many instances, need to devote substantial time to the production floor and manage household chores. Hence, sieving through the internet for relevant information may not be easily manageable. Similarly, the internet through different ecommerce tools could be instrumental in expanding markets for entrepreneurs, but the lack of cross-border payment facilities has left cross-border ecommerce still unreachable for Nepali entrepreneurs. Still, for many women entrepreneurs, the internet, especially social media platforms, have emerged as a viable tool to connect to buyers, albeit domestically.
Although all entrepreneurs - both men and women - are affected by the information gap, men have access to social networks and are relatively more mobile to navigate the spaces that are dominated by men. Women entrepreneurs point out that they are not able to socialise with male business associates after working hours. Since the trading spaces are overrepresented by men, this results in limited business opportunities for women. Besides the time constraints due to care work, they also want to avoid situations that could put them in a vulnerable position to sexual assault and also due to fear of society, which frowns upon such meetings no matter the objective of such social calls. This kind of social networking is quite important to move businesses ahead. Even without deliberate intention to exclude, women entrepreneurs are excluded from such networks.
One of the ways to address this issue is by making the relevant information easily available. Although this may not make up for the informal information exchange, this will at least ensure that women are not excluded from accessing formal information. The rise of digital space has made information sourcing and dissemination quite easy. However, not everyone is equipped with the skills and time to ferret out relevant information from the internet. This is where government, civil society organisations and business chambers could come together and make information easily accessible. Basic and necessary information related to procedures and regulations to export must be made available by the government which will require coordination among different ministries - Ministry of Industry, Commerce and Supplies, the Ministry of Finance, and the Ministry of Home Affairs, among others. Trade and Export Promotion Centre (TEPC), which already operates Nepal Trade Information Portal, could lead the coordination among these government entities and be the focal point for those seeking information. Nepal government’s diplomatic outposts in different countries could be mobilised to collect information related to markets and regulations. A mechanism should be in place that guides embassies and consulates around the world to keep tabs on the changes in policies in the destination countries that might affect the business interests of Nepali entities and report them immediately.
The information gap is a significant barrier for women entrepreneurs, especially when they are venturing into the international market. Bridging this gap for women entrepreneurs may not be as easy as it is for men considering the socio-cultural constraints. Addressing information gaps will help women entrepreneurs navigate the export markets better and might even have a positive impact on the country’s overall trade balance.
(Singh is a Programme Coordinator at South Asia Watch on Trade, Economics and Environment.)