Sub-Saharan Africa has the largest share of female entrepreneurs in the world. On the corner of any market street in Lagos, you will find women spearheading their enterprises. Still, Africa is one of the most legally and financially restricted areas for women in the world and Nigeria is no exception. Many might not be shocked, given the stereotypical narrative of the deprived African woman. Gender inequality has been shown to have an adverse effect on economic growth; however, this effect is even more detrimental to Africa’s development due to the significant role women play in the economy.
How can a social issue have such a detrimental effect on economic progress? We find the answer once we explore women’s interactions with the four factors of production – land, labour, capital, and entrepreneurship.
In many ways, entrepreneurship can be considered to be the most central of the four factors of production. Of what use is land and capital without the entrepreneur with the ideas? In a development context, entrepreneurship is a large mechanism for the flow of resources and money, which in many ways determines the standard of living.
Africa’s poor empowerment of female entrepreneurs stunts the performing potential of its most important factor of production, limiting development. The extent to which female entrepreneurs are neglected is most evident when it comes to access to credit – an important vehicle to start and finance businesses. On average women in developing countries are 20% less likely than men to have an account at a formal financial institution and 17% less likely to have borrowed formally in the past year.
In Nigeria in particular, this limited access to credit is caused by two factors. The first supply issue being that formal institutions believe female-owned businesses tend to be less profitable, thereby limiting their ability to pay back loans. This is despite various research that has shown women have a higher repayment rate.
On the demand side, women shy from formal institutions loans because of the assumption that their husbands will be informed of this and extract the funds from their businesses for personal use. These factors reinforce themselves and indeed cause female-owned businesses to generate on average, less revenue than male-owned businesses. The result of these gender biases is less utilisation of female entrepreneurs and consequently limited development.
Land, Labour and Capital
Many are familiar with the narrative of widows losing access to family land due to the death of their spouse. Women’s rights to land are often restricted by traditions and customs especially in de-facto situations where land ownership transfers to a woman upon the death of a family member. Gender norms often reinforce land grabbing in these instances.
How does this affect economic growth? The simple answer is agriculture. Women are estimated to be the dominant workers in agriculture, yet they are estimated to own less than 10% of land. This is significant because land ownership dictates labour and capital allocation in farming processes. An academic observation in Burkina-Faso notes that women’s fields were more efficiently farmed than men’s fields. However, more labour was being allocated to male-owned land, which of course is a basic illustration of resource misallocation. If women’s land rights are not protected this inhibits the utilisation of land as a factor of production and negatively affects women’s ability to use land not only for food production but also as collateral for credit.
The case of labour is simple; women make up approximately half of the labour force. If there is considerable discrimination in hiring women in the workplace (which there is) or giving women access to education and qualifications, then you are automatically reducing the volume and quality of skilled labour as a factor of production. This is especially evident in the disparity between girls and boys in STEM subjects and later on in STEM professions. A weaker labour force leads to inefficient use of land and capital.
She Has Everything to do with It
This discussion illustrates that ‘She’ – women, have everything to do with ‘It’ - the economy. We can’t ignore the significant economic value empowering women will add to local African economies. The issue of empowering women cannot be seen as a zero-sum game where women’s increased participation comes at the expense of men. This simply isn’t true - we all gain more.
Annual GDP growth in Sub-Saharan Africa could rise by as much as 0.9% if gender inequality levels drop as low as it has in fast-growing Asian economies. Socially empowering women by improving land rights and educationally empowering women will strengthen inputs into the economy and equip Nigeria to propel its economy successfully. Let’s hope that the government, companies and the wider society start to get this message. Why try to drive an economy with only half of its engines?