Microfinance Is Good for Women, but It’s Only Part of the Solution

Ellen Kullman (DuPont), Maria das Graças Silva Foster (Petrobras), and Chua Sock Koong (Singapore Telecommunications) lead three of the most powerful companies in the world. These women, like many other great leaders, got there by working their way up the ladder — not by founding entrepreneurial ventures. Career paths are not one-size-fits-all, yet in emerging markets, it's often assumed that microfinance — the use of small loans to foster self-reliant small businesses in a community setting — is the only path for women seeking economic opportunity. Microfinance has accomplished tremendous things and helped millions of women launch their own businesses; however, it is not a complete means of economically empowering women. For many women in the developing world, a better approach may be to gain employment in existing companies.

The new Booz & Company study "Empowering the Third Billion: Women and the World of Work in 2012" examines the common global barriers women confront in entering the workforce. As part of our research for the report, we analyzed 128 countries and ranked them by their performance in getting women more directly involved in national economies, not only as entrepreneurs but also as employees. In addition, we assessed the factors that could offer the greatest boost to these efforts, for both governments and the private sector, if women were set up to reach their full economic potential.

Microfinance was one issue that we considered. Microfinance programs often represent the principal source of credit for small businesses, but in many markets, using microfinance as a stand-alone solution for entry into the workforce creates drawbacks for women. We concluded that in order for women to reach their full potential in the global marketplace, governments and business leaders must help them move beyond microfinance.

For one thing, microfinance can be restrictive, in that the vast majority of related loans are made to businesses in predictable categories such as retail and services. These are admirable efforts, but they offer limited (and usually only local) growth potential. There is also a risk that these ventures may cause some to associate women's businesses solely with microfinance, leading lenders, incubators, and even the entrepreneurs themselves to limit their thinking to small ventures, when the ideas and market potential of some women may warrant something bigger. In short, microfinance is necessary but not sufficient to truly move the needle and get women more directly involved in national economies.

While there are ways to improve microfinance and expand the availability of credit for startups in emerging markets, here's a more radical proposal: Some women--like some men — may benefit more from traditional employment at existing companies. In other words, in terms of matching the strengths and needs of individual women, microfinance can improve economic empowerment, but traditional employment can as well.

Why? Because credit isn't the only issue holding women back. Although the circumstances within individual countries vary, a whole range of common challenges around the globe serve to stifle women's economic growth. Probably the most universal challenge is the aspect of caretaking. In both developed and developing economies, women have the bulk of the responsibility for young children and the elderly, along with the bulk of housework duties. Among countries of the Organisation for Economic Co-operation and Development (OECD), women on average spend about 2.4 more hours than men on unpaid work, including caring for family members, each day. One study found that if care work were assigned a monetary value, it would account for 10 to 39 percent of GDP.

Another common challenge is a lack of support for women. In every country in the world, women need investments to be made in their future: financial, educational, and cultural. None of these elements can stand alone. Yet at a time of tremendous fiscal pressure, countries often shift these investments to the back burner, in favor of other needs. This is understandable — it's difficult to invest in long-term human capital if the country's roads are falling apart — but such an approach leaves many women struggling to figure out their own path forward.

In this context, private-sector employment may be a more viable option for many women. Although governments can take steps to address some of the issues that hold women back, such practices are often deeply embedded in local traditions and norms. Given the pace of globalization, the private sector can and should take on these issues as well.

This is far from a perfect solution, of course. As our report indicates, female employees at some companies still face discriminatory hiring and advancement policies. Such policies are often illegal but nonetheless remain in practice. Many companies also need to adopt more progressive policies regarding flextime, career stops, job sharing, and other alternative career paths. The best global companies are already working to implement these approaches.

In fact, the most forward-thinking companies — particularly multinational corporations — are currently applying progressive employment practices around the world. As a result, they're changing the face of work for many women. Hewlett-Packard, for example, offers a program in which employees provide mentoring services to about 25 talented individuals each year. The recipients, designated Global Health Corps (GHC) fellows, work with health-related nonprofits in developing markets around the world, and increase their employability. And HP employees get to leverage their expertise in areas as diverse as IT, engineering, and HR in order to improve access to healthcare. Nearly 45 percent of those involved in the program — both mentors and fellows — are women.

In sum, the challenge of empowering women is sufficiently broad that success will require pursuit of all avenues. That means improving microfinance for the millions of women who want to launch their own companies, but also acknowledging that there are millions of others for whom traditional company employment may be a better fit.

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