🚦Pitfalls, promise, and potential

In our second Spotlight for International Women’s Day, we look at the role that digital technologies can play in tackling gender barriers for small business owners. We highlight that women-led microbusinesses, in particular, are often helped by digital’s low entry barriers: female entrepreneurs develop flexible digital business practices and can feel empowered.

While these benefits are tangible, we also show that ingrained barriers dampen inclusive growth effects, as they keep women-owned businesses from exploiting the most significant and long-lasting benefits of digital adoption. The digital opportunity for female-led businesses is real, but it does not compensate for structural change.

Flexibility and empowerment for women-led microbusinesses

Especially for female-led microbusinesses like traders, food producers, makers, and beauticians, digital technologies can become important assets.

Social commerce — the marketing and sale of goods through widely used social networks like Facebook and WhatsApp — plays an outsize role for female business owners. Not least since the pandemic, women have taken to social media and ecommerce platforms to reach customers and expand their businesses.

For any small business, such apps are useful sales and marketing channels: customers can find out about products and get in touch with owners directly. But for female business owners — who are often also the primary caregivers for their families — flexibility stands out as just as important a factor.

Apps allow them to manage their enterprise part-time and from home. For example, female owners of small businesses in Southeast Asia and Africa reported “flexibility” and “access to markets” as the major benefits that they derive from e-commerce.

Delving deeper into how women use digital technologies to run their businesses, research by Caribou Digital in Kenya shows that they prefer to use technologies that they are already comfortable with as individual users.

The barrier to adopt social media to manage their business is thereby fairly low. The study also outlines how women business owners engage in innovative digital practices, like informal online marketing (such as network-driven referrals) or collaborations with influencers.

On the contrary, full-fledged e-commerce platforms can be costly to use, require platform-specific skills, and can lead to lock-in. These downsides are at odds with many female business owners’ need for low cost and flexibility.

A sense of empowerment can be another benefit that women business owners derive from social media in particular and digital technologies in general. This is because digital technologies can open up a new space of activity where traditional gender norms apply to a lesser extent and that is beyond the purview of male family members.

Research has found that disbursing microloans to women’s mobile wallets rather than in cash can drastically improve their ability to use the money for their business rather than for other social demands on them.

The Caribou study surfaced examples of women gaining in financial independence through social commerce. Respondents in the mentioned Southeast Asia survey added “reaching personal goals” as a key benefit they derive from ecommerce.

Successful digital training initiatives illustrate how women business owners gain confidence as they progress in digitalizing their operations.

A low digital growth ceiling

Can this digital progress close the gender gap in overall small business success? Judging from the available evidence, probably not. This is because women continue to be vastly underrepresented as owners of growth-oriented small businesses, especially in emerging markets.

When microbusinesses adopt digital technologies, they may improve their performance, but the gains stand in no relation to what formal growth-oriented small businesses can achieve by upgrading their digital capabilities — and those are still far more likely to be run by men.

The gains that women-run micro businesses can derive from digital technologies may ultimately hit a fairly low ceiling. For example, a study by UN Women in Indonesia suggests that female business owners preferred simple digital tools precisely because they needed to manage a high domestic workload and did not have time to delve deeper into more sophisticated applications.

The above-mentioned Caribou study highlights that using social media for market access can bring short-term gains, but small businesses can be stuck with a customer base that is mostly confined to the business owner’s personal networks. Full-fledged ecommerce platforms are often the only way to export products and grow further, but this step is harder for women business owners who lack the capital to take such risks.

The pandemic appears to have accelerated this divide: women adopted technology more readily in the short-run, but men (as those who are more likely to command the necessary resources) made more investments in sophisticated solutions.

Female microbusiness owners can also be limited through gender-specific technology use patterns. A survey by UN Women, GoJek, and the Indonesian National Council for Financial Inclusion confirmed that women are more likely than men to value the flexibility that digital technologies afford them to manage personal and work responsibilities, but interview follow-ups found that these upsides are contingent on a range of factors in women’s environments. In particular, women often share their spouses’ smartphones and rely on others to help them use digital applications in more depth.

Structural change beyond technology

Ultimately, digital technologies open up major opportunities for women-owned small businesses, but their impact would be significantly higher if structural barriers beyond the realm of digital technology were reduced.

Much of the qualitative evidence suggests that social media and platforms enable market access, flexibility, and empowerment, but as soon as capital and tangible resources are required for female-led businesses to excel, the digital-induced benefits do not go far enough. Increasing availability of digital technology therefore continues to benefit male-owned more than women-owned businesses.

The pandemic has exacerbated gender gaps and has underscored the need for more gender sensitive interventions and support. While small business supporters are right to celebrate digital opportunities for women, they must not be blind to the many informal and formal, individual and collective factors that prevent women business owners from achieving true equity with their male peers.