👩‍💻 The pandemic’s dire effects on women-owned small businesses–and its digital opportunity

In the run-up to International Women’s Day, we take a closer look at how the Covid-19 pandemic has affected female-owned businesses and at how digital technologies have compensated for some of its negative impacts.

We tackled this topic in an earlier spotlight where we delved into a World Bank study that showed that women-run businesses adopted digital tools at a faster rate than men-run ones in response to the pandemic. In this post, we want to go deeper and examine a wider set of studies that include qualitative and quantitative evidence as well as several reviews that were conducted.

The evidence base we looked at covers a range of countries across the globe. The studies paint a remarkably consistent — if bleak — picture: women business owners were hit extremely hard, they were quicker than their male counterparts in adopting digital tools to counter the pandemic’s effects, and they often did this to sustain their enterprises while also attending to higher care responsibilities.

Why female business owners have been hit a lot harder

Universally, Covid-19’s effects on women-owned businesses have been dire. Studies cite upwards of 80 per cent of female business owners reporting serious negative effects of the pandemic on their business, with decreasing revenue as the most important and immediate impact. According to Facebook’s data, 20 per cent of women-owned small businesses had to shut down, compared to 16 per cent of male-owned ones. These figures are concerning because, especially in emerging economies, most female-led businesses are microbusinesses that directly support the livelihoods of other women and their families.

Studies covering a wide range of contexts, including by the World Bank, OECD, IFC, CARE, and Global Entrepreneurship Monitor, identify the same major factors because of which women-owned businesses have been hit harder. The most important one is that female-led businesses are overrepresented in the sectors and industries that the pandemic affected most directly. These include personal and care services, tourism, retail, and arts and entertainment. All these sectors depend on face-to-face social interactions which customers avoided due to legal restrictions and out of fear of a Covid-19 infection.

The second reason for unequal impact is that women-owned businesses are more likely to be newer and smaller, and as such more vulnerable to economic shocks. These businesses are less likely to have assets that could bolster them from a crisis like the pandemic, such as cash reserves, insurance, or access to government support.

Third, all over the world and especially in emerging markets, women business owners carry the brunt of family and social demands. The pandemic led to extended closures of childcare, school, and senior care facilities, heightening the burden for women entrepreneurs at the time when their businesses were suffering. Studies show that women were less likely to have the resources and time to focus on saving their business, either through active management of the crisis or through pivoting their business model. There is also evidence that these extreme stresses resulted in lower confidence and motivation among women to keep their businesses afloat.

Concerningly, all three factors are structural. They are hard to overcome using ad hoc, singular interventions. These findings also suggest that women-owned small businesses may be less likely to rebound as the pandemic progresses and subsides. Indeed, a longitudinal World Bank survey found that small, young, and women-owned firms did not increase their revenues in 2021, while larger, older, and men-owned firms did.

A digital boost

The good news has been that the pandemic has led to an uptick in digital adoption among women-led small businesses. While there are fewer studies on this, results are consistent: female business owners were quick to adopt new digital tools and deepen their use of those they had already employed before the pandemic.

For instance, a large-scale IFC survey in 13 African countries reported the same interest in, and slightly higher adoption of, digital tools among women- compared to men-owned small businesses during the pandemic. Likewise, a survey by UN Women in Indonesia suggests that young women business owners outdid their male counterparts in using digital tools to sustain their business, with many actually expanding their operations during the crisis.

Both quantitative and qualitative evidence seems to suggest that women were primarily looking for an easily accessible workaround to lockdowns and restrictions. Facebook, WhatsApp, Instagram and free and easy-to-use ecommerce apps (like GoJek) became their digital tool of choice. The UN Women study also estimates that the vast majority of women-owned businesses used ecommerce tools to be able to continue their business while taking care of pandemic-induced care responsibilities at home.

Data from soon-to-be-published research by Caribou Digital further suggests that female business owners benefited from a crisis-induced suspension of gender stereotypes. During the extraordinary circumstances of the pandemic, men (spouses, family members, customers) found it legitimate that women use digital tools for their business for the duration of the crisis, if only for income to come in. Of course, the question is whether men’s change of heart has any chance of being sustained as the pandemic winds down.

The opportunity and necessity for concerted action

Through the pandemic, women business owners have seen the opportunities that digital technologies can afford them, both in hard economic terms and in terms of empowerment. They are demanding more support on capabilities like digital marketing, business resilience, crisis operations, and ecommerce.

The Covid-19 crisis has ultimately resulted in a greater readiness among women and their networks to rely more heavily on digital technologies, yet it has also deepened structural gender barriers. For policy and small business supporters, this reality has a clear implication: they face an opportunity to embed digital technologies into their support offering, they need to double down on gender-sensitive support interventions, and they need to address structural and cultural barriers decisively and holistically.

The major domains where action is necessary — increasing digital access, digital skills and capabilities, and access to finance — have not changed, and gender-intentional small business support remains unfinished business. Female entrepreneurs and workers have been remarkably resilient in the face of the pandemic, in some cases improving their status despite the crisis. Yet, both the urgency and the possibility of impact of such measures have increased through the Covid-19 crisis.

It will depend on governments, support organizations, and not least on the men in women business owners’ lives whether digital’s short-term wins can be sustained, and whether the structural imbalances that the pandemic has deepened can be countered.