4 min read.Updated: 08 Sep 2020, 01:40 PM ISTM. P. Karthick,Mridulya Narasimhan
A survey shows as much as 45% of the permanently-closed women-led enterprises may never set up an enterprise again. This could not only hurt the economic independence of women but also have implications on their role in household decision-making, freedom of movement and collective agency at a community level.
Women are under-represented as entrepreneurs, and this gender divide is starker in developing economies. In India, only 20% of the enterprises are women-owned, providing direct employment to 22 to 27 million people. The covid pandemic has affected people across the globe, but its impact on women has been disproportionately higher. According to a Mckinsey & Co report, female job-loss rates resulting from covid are about 1.8 times those for males.
Between June and July, LEAD at Krea University interviewed 2,083 women entrepreneurs across Bihar, Chhattisgarh, Madhya Pradesh and Odisha to understand how their businesses were coping in the wake of the pandemic.
This article presents a rather somber narrative, one that has the potential to take back women’s economic empowerment by many years.
Even with a 73% average drop in revenues, only 20% of the respondents took enterprise-related loans during the lockdown. About 62% of the respondents dipped into personal savings or business cash reserves to sustain their businesses and two-thirds of the respondents reported reducing their scale of operations or shutting down temporarily to cope with the pandemic.
Our findings show that one in three women-led enterprises were either temporarily or permanently closed. This proportion is consistent across the states surveyed, although there is variation between temporarily and permanently closed statuses among states. The short-term economic impact of business closures is predictable given the slump in the market. However, in the case of women-led enterprises, the closures have affected business outlook and their risk appetite.
But what is most alarming is that our study finds that about 45% of women-led businesses that faced permanent closure do not foresee starting another enterprise ever again, even if markets returned to normalcy. That is to say that one in every two permanently-closed enterprises may once and for all be completely elbowed out of the enterprise ecosystem.
What could be the reason for this sentiment? While this was a descriptive study, there are telling signs of what could’ve affected women’s participation in their enterprises.
Women-led enterprises as a secondary source of household income: Revenue from women-led enterprises has mostly been considered as a secondary source of household income. While this throws light on the social norms around gendered roles in economic opportunity, this perceptual bias is only further exacerbated by the pandemic. Fifty two percent of the women interviewed reported their business as being a secondary source of household income prior to the lockdown, but this proportion rose to 64% by June.
Increase in household responsibilities, reduced enterprise activity: Our findings on unpaid care work during the pandemic are consistent with many recent studies that have documented an increased burden of household responsibilities, including caring for dependents, household chores and primary production. However, our study also shows that 59% of respondents are spending less time on their business activities.
While covid has taught male-members of the household to shoulder some household responsibilities, the increased burden on women and the limited support from household members has left little room for self-care and even lesser time for their business.
Market shocks affect risk appetite: Literature on risk-appetite has consistently shown that women are more risk-averse than men. Studies have also documented the gender-differences in financial decisions taken under high-stress situations and indicate that women choose lower-risk propositions (bit.ly/3bC3Byz). Our study asked women their preference on starting a new business while the lockdown was still in effect. Given the adverse effects of market shocks, are women likely to stick to their decision of not opening another enterprise even in a post-lockdown scenario?
What does this mean for enterprise-owners in the long-run?
Our study gives a glimpse of the current sentiment among women-led enterprises and their business outlook, but these market shocks may very well have long-term implications on women’s economic participation.
Should women-led enterprises follow through with their decision of not opening a new business in the future, it could mean that a proportion of enterprise-owners may exit the labour market completely to assist in their spouse’s business, or to help with unpaid care work at the household level.
Some of these enterprise-owners may resort to wage or salaried work as alternate means of income. This could mean a drastic decline in own-account workers over a period of time, although with a marginal increase in casual and regular wage work. With the return of inter-state migration, and the male members of the household returning home, the struggle for women to find appropriate work opportunities is expected to become an entry-barrier to labour force participation. Moreover, women earn only 52% and 60% of what their male counterparts earn in regular and casual labour, respectively (Periodic Labour Force Survey 2017-18). With the limited job opportunities, and the sudden increase in availability of male labour force, the earnings gap may further widen.
The Government of India has taken various steps towards women’s economic empowerment by way of initiatives like Stree Shakti package, Udyogini scheme, Mahila Udyam Nidhi scheme, etc. However, in a country like ours, which struggles with disguised misogyny but is still striving for an equitable entrepreneurial environment, understanding the implications of the pandemic on women’s current economic opportunities has become even more important. In the short-run, enterprise-owner’s decision to not restart a business would mean loss of economic independence. In the long-run, however, this could have implications on their household-level decision-making, freedom of movement and collective agency at a community level.
The authors are, respectively, a data scientist and senior research manager at LEAD at Krea University.