Digital Inclusion and Empowerment of Women Entrprenuers in the Post-Pandemic Era

The accelerated transition to digital solutions caused by the COVID-19 pandemic has exacerbated gender disparities, while simultaneously creating opportunities to empower women-led and women-owned SMEs (WSMEs). This brief provides recommendations to the G20 to support the digital inclusion and empowerment of WSMEs through: (1) building their digital capacity, (2) increasing their access to and usage of digital financial services, and (3) improving the digital entrepreneurship landscape—regulation, legislation, and infrastructure. Having long supported the advancement of global policies which empower women and reduce gender inequalities, the G20 is best positioned to digitally empower WSMEs, so as to build a more digitally inclusive, equitable, and resilient society.

Challenge

The economic shocks and unprecedented rate of digital transformation brought about by the COVID-19 pandemic have exacerbated gender disparities for women entrepreneurs around the globe (Azcona et al., 2020; GSMA, 2021; Kulaksiz and Rafi, 2021; Madgavkar et al., 2020; Women Entrepreneurs Finance Initiative, 2021). WSMEs have been largely left behind when it comes to the rapid adoption and usage of digital technologies. The pandemic has highlighted the need for WSMEs to digitally adapt in order to survive (OECD, 2021a). While the growth of the platform economy and other e-services for businesses has created opportunities both in terms of operations and financing (OECD, 2021a; Ughetto et al., 2020), not all SMEs have benefited. In particular, many WSMEs were not prepared to connect and/or transition their businesses to the digital economy, largely due to gaps in digital skills and literacy (Kamberidou, 2020).

Being able to access digital platforms and make use of social media, e-commerce, and digital payments allows women entrepreneurs to expand their access to new customers, suppliers, and partners (Rajahonka and Villman, 2019). Such access is critical to overcoming constraints typically faced by women related to restricted social networks and mobility. Mobile technologies and digital payments, in particular, help women save time and have privacy and control over their financial decisions, information and businesses. However, some key barriers continue to prevent women from adopting digital payments and online commerce, such as the lack of accessibility, awareness, capacity, and trust. These challenges are often compounded—especially in developing countries—by laws, regulations, and social norms that further undermine women’s ability to inclusively participate in the labor force, own and control assets, establish and access funding to start or grow a business and, ultimately, become empowered to make their own economic decisions (GERA, 2021; GPFI, 2020a).

Interventions are needed to address these gender inequalities among WSMEs to minimize the widening of the gender poverty gap and potential systemic risk to global economic growth (Rigoni et al., 2022). Recent reports indicate that about 62% of women-led small businesses were strongly impacted by the pandemic, compared to just over half of those led by men (International Trade Centre, 2020; United Nations, 2021). The majority of WSMEs operate in sectors that are less profitable and less capital intensive, and are often located in rural and remote areas that have been hit hardest by the pandemic (Ionescu-Somers and Tarnawa, 2020). Women entrepreneurs also face more limited access to financing, as well as lower business capacity due to greater household and childcare responsibilities. Even so, WSMEs are widely recognized to have untapped economic potential, as SMEs are estimated to account for 60-70% of total employment and almost 50% of economic growth (Schnabel and Keenan, 2020; United Nations, 2021). Empowering women entrepreneurs overall could add as much as $28 trillion USD to the global economy (Woetzel et al., 2015), while closing the entrepreneurial gender gap could boost the global economy by $5 trillion USD (Unnikrishnan and Blair, 2019).

The G20 countries should endorse a multi-faceted global strategy that accelerates and supports the digital inclusion of women entrepreneurs and empowers them to be successful in both digital business and the digital economy. The G20 can achieve this overarching goal via initiatives that accelerate technology diffusion and adoption by women entrepreneurs to bridge the gender gap in digital skills and access to financing, especially for those most vulnerable to the digital transformation and the post-COVID-19 transition. Empowering women entrepreneurs to take advantage of the ongoing shift to digital business models and practices is a major challenge, but would be an important catalyst to reduce gender disparities and foster future economic growth.

Proposal

We propose that the G20 take a globally-coordinated and multi-faceted approach that supports the digital inclusion and empowerment of women entrepreneurs in the post-pandemic era. Our recommendations focus on achieving three main objectives: (1) building digital capacity among WSMEs, (2) increasing WSMEs’ access to and usage of digital financial services, and (3) improving the digital entrepreneurship landscape—regulation, legislation and infrastructure—to support WSMEs. Note that these recommendations are particularly important for developing and emerging economies, where much work is still needed to close the gender gaps, especially in terms of entrepreneurship and financial and digital inclusion. Appendix A1 highlights gender differences in entrepreneurial conditions across a subset of the G20 countries, and shows that some developing and emerging economies may not be as well-positioned as others to implement recommendations highlighted in this brief. As such, each country needs to prioritize particular recommendations and develop strategies that are most pertinent to them when it comes to improving the digital inclusion of WSMEs within their country.

Recommendation 1: The G20 should encourage the development of national strategies that help strengthen women’s managerial and digital skills and support the digital transition of women-led and women-owned businesses (WSMEs).

The G20, in coordination with its Education Working Group and Digital Economy Task Force and the W20, should support strategies that empower managers and workers in WSMEs with the digital knowledge and skills necessary to increase the efficiency of their business processes. In particular, WSMEs need technical skills related to small business management and the shift to digital operations, marketing, investment readiness, and development (Ughetto et al., 2020). Public-private sector initiatives are needed to assist women entrepreneurs and WSME workers in developing their competencies in running their businesses and raising their awareness and skills related to the digital solutions that can help optimize their business models and operations. Key topics should include the usage of social media and other digital platforms for marketing and outreach purposes (Rajahonka and Villman, 2019). This is typically the entry point for digitalization for most SMEs (OECD, 2021b). Social media is a critical communication tool for developing visibility and expanding access to customers and markets. It can also serve as a channel to generate and process sales, especially for SMEs that find it challenging (financially or technically) to implement more sophisticated e-commerce platforms (UNCTAD, 2021). Capacity building programs can also cover other digital business functions related to financial management, human resources, interactions with e-government, and electronic invoicing. Based on their readiness for wide-ranging digital adoption, some WSMEs would benefit from advanced topics such as e-commerce, collaborative platforms, data analytics, and cybersecurity. Such learning programs could be provided online or through traditional training workshops, apprenticeships, mentoring, and coaching initiatives. To engage WSMEs in these programs, national strategies can reduce training costs through subsidies or tax incentives (Schnabel and Keenan, 2020). They can also rely on public channels and employers’ networks to raise awareness on the importance of digital skills development (OECD, 2021b). To this end, the G20 should also coordinate with the B20 and its Women in Business Action Council, its Digitalization and its Future of Work & Education Task Forces, which have also identified the digital advancement and empowerment of WSMEs as a key priority.

Besides addressing “internal” skills gaps through training and learning initiatives, national strategies are needed to facilitate WSMEs’ access to external technical expertise. This technical support is vital for women owners and managers of small businesses who are still unaware of the potential of the digital transition or are lacking the capacities to undertake the switch to digitalization (OECD, 2021b). Even those WSMEs that have already received training and capacity building support would greatly benefit from technical assistance and business restructuring advice. The G20 should encourage public-private sector strategies that facilitate the connection between WSMEs and technical consultants whose role is key in assessing business processes and providing guidance for the implementation of digital business tools. To make such advisory services accessible, policy initiatives can include financial support (i.e., grants, consultancy vouchers), technology extension programs that target groups of small businesses with similar needs, and networking opportunities to connect WSMEs with technical specialists.

Lessons can be learned from a variety of existing skills development and digitalization support initiatives, even if they have not specifically targeted women entrepreneurs (OECD, 2021b). Many were launched in response to the COVID-19 pandemic and the containment measures focused on supporting teleworking and digitalization, and have had a long-lasting effect on technology adoption and new practices (OECD, 2020a, 2021a). For instance, programs such as Acelera PYME and Digital Kit in Spain have helped SMEs and self-employed workers to rethink their business models and strengthen their managerial and digital skills. These programs also have provided financial support to facilitate SMEs’ connection to “digitizing agents”. In Slovenia, “digital vouchers” support micro-SMEs in developing digital competencies and digital strategies. Germany has proposed the Go-digital funding project that enables SMEs to benefit from the expertise of authorized consultancy firms to implement digitalization projects. Other initiatives include the Digitaliza tu pyme program in Chile, which provides learning materials and digital tools, and the Modern Enterprises Program in Hungary, which focuses on digitalizing rural businesses with the help of consultants. Aside from country-specific initiatives, the OECD’s Going Digital Integrated Policy Framework represents an inspiring comprehensive approach to digital transformation that can be applied by members’ and partners’ governments (OECD, 2020b). The framework underpins the flagship Going Digital Toolkit, which provides interactive data visualizations and access to key indicators to help countries assess their state of digital development and formulate appropriate policies. Also, the EU-funded DigitaliseSME project supports the digital transformation of SMEs in Europe by connecting them to “digital enablers”. In terms of women-specific initiatives, the WeHubs (Women Web Entrepreneurs Hubs) is among the best initiatives that support female entrepreneurship in the digital sector. It fosters networking opportunities for women entrepreneurs to enable access to business support and relevant platforms.

Additionally, the G20 should also encourage policies that prioritize WSMEs in government stimulus packages and in incubator and accelerator programs. For instance, the United Nations Capital Development Fund (UNCDF) has launched programs in Myanmar to accelerate financial inclusion and develop financial programs focused on low-income groups and women, among other vulnerable groups (Soriano et al., 2019). Incubator and accelerator programs can encourage women entrepreneurs to become more innovative and efficient by equipping them with knowledge about product development, sales and customer experience, as well as connecting them to mentors and investors. Incentivizing accelerators in emerging markets to increase start-up financing for women entrepreneurs, and prioritize support for WSMEs during and post-pandemic, will help promote women’s financial inclusion and active economic participation (Kulaksiz and Rafi, 2021).

Acquiring the managerial skills and access to support needed to digitalize their businesses requires that women entrepreneurs already have the necessary digital skills. These can range from basic digital skills associated with the usage of digital devices, applications, and platforms to more sophisticated skills related to the digital operation, management, and marketing of a business, including advanced-level digital skills in frontier STEM areas such as coding and machine learning (Rigoni et al., 2022; Lyons et al., 2019a, 2019b; OECD, 2017, 2019). The G20 should encourage countries’ efforts to develop and implement broad-based digital literacy programs that equip women entrepreneurs with the skills required to effectively participate in today’s digital economy and society. Previous T20 work and recommendations for the G20 have emphasized the importance of frameworks to help governments assess and improve digital inclusion (Lyons and Kass-Hanna, 2020; Lyons et al., 2019a, 2019b; Sorgner and Krieger-Boden, 2017). The #eSkills4Girls initiative, a joint project by G20 members launched in 2017, is a valuable resource for the G20 governments and those of other developing countries to promote women’s digital inclusion. It showcases best practices and policy recommendations that are playing an essential part in helping to get more women online and into the tech sector.

To take advantage of the opportunities the digital transition has to offer, women entrepreneurs need to be financially literate so as to effectively use the financial services, especially digital financial services (Kuroda et al., 2019; Lyons and Kass-Hanna, 2021, 2022; Morgan et al., 2019). The G20 should encourage the design of national financial literacy and digital financial literacy programs that specifically address the needs of women entrepreneurs and empower them to protect themselves against privacy and cybersecurity threats.

Recommendation 2: The G20 should support national efforts that increase access to and usage of digital financial services that assist women entrepreneurs in creating, developing, financing, and growing their businesses (via e-commerce, digital payments, credit, capital, insurance and risk mitigation tools). 

First, the G20 should encourage countries to adopt policies that promote improved digital access and usage among women in general, and WSMEs in particular. The G20, through its Digital Economy and Development Working Groups and in collaboration with the W20 and the B20, should provide guidance to countries on how they can advance technological infrastructure and connectivity that enable access to digital platforms and to digital financial services (Kuroda et al., 2019; OECD, 2017). Women have lower rates of internet access, especially mobile internet access (UNCTAD, 2021). For women, the global Internet penetration rate is about 45%, as compared to about 51% for men—this corresponds to having 250 million fewer women than men online (OECD, 2018). This reflects numerous factors, including lower rates of having an official identification (ID), lower rates of owning mobile phones, and lower rates of Internet usage. Lower ownership and usage of mobile phones can be attributed to cost factors, since women tend to have lower incomes, less knowledge about the benefits of the Internet, and social norms related to concerns about safety for women, including harassment and cyber bullying. The G20 should encourage governments to promote policies that eliminate the gaps between men and women in terms of having an official ID, which in most cases is a key requirement for obtaining a mobile phone. Policies that lower the costs of obtaining and using mobile phones are also needed. Educational programs and trainings can be developed to inform women, and WSMEs specifically, about the benefits of the Internet and how to protect themselves against online harassment, bullying, privacy and cybersecurity risks, as well as insufficient disclosure and fraud.

Second, the G20 should support policies that foster digital financial inclusion among women entrepreneurs. Women face barriers to financial inclusion (i.e., having their own bank account and being able to access and use it and other financial services digitally) (GPFI, 2020a). These mainly include women’s lower levels of cash, lower mobility, among others. Appendix A2 highlights a few key gender gaps related to financial inclusion and entrepreneurship among selected G20 countries—differences in account ownership, ability to borrow for business purposes, and usage of digital payment services. Priority areas in terms of policy actions and interventions can be identified for particular countries, especially emerging and developing economies that may require more support and coordination from advanced G20 economies (such as Germany, Japan, and the United States) in order to achieve better digital financial inclusion outcomes for WSMEs.

To this end, the G20 should encourage countries to refine national financial inclusion strategies to include digital financial inclusion and to consider the special issues that are particularly relevant to women. Women are typically poorer than men and more price sensitive. Affordable financial products that cater to low, inconsistent incomes and high-frequency, low-denomination transactions might be more relevant to them. Moreover, women are often considered to be responsible for caring for older relatives, raising children, looking after family farms, organizing side businesses, and financing family events such as funerals and weddings, for which tailored products would be useful. For example, in the Philippines, commitment savings products—which restrict access to funds until a predetermined savings goal is met—boosted women’s household decision-making power, particularly for women who had below-median decision-making power (GPFI, 2020a).

The G20 should also encourage public and private sectors to leverage social media platforms to raise awareness among women entrepreneurs and their customers about the availability of digital financial services, how to use them for online commerce, and protect against fraud and cybercrime. In some contexts, barriers to women’s usage of digital financial services are linked to restrictive social norms. The G20 should promote national strategies that encourage service providers to take a more gender-centric approach such as relying on women agents to expand women’s use of digital financial services. These strategies should also entail designing campaigns that influence gender roles and the acceptance of women entrepreneurship and financial decision-making. As more women use digital financial services, they can make a larger impact in their communities and help shift gender norms (Koning et al., 2021). To this end, the G20 should propose a globally coordinated approach to measure and track progress towards digital financial inclusion of women, especially women entrepreneurs.

Third, the G20 should encourage national policies and private-sector strategies, especially from fintechs, that increase access to alternative digital financing for WSMEs. Women entrepreneurs face greater difficulty in accessing financing to start and grow their businesses, especially in remote locations and underserved regions where traditional financing options remain limited (OECD, 2019; Rigoni et al., 2022). This reflects lower levels of wealth and collateral, discriminatory attitudes from financial institutions predominantly staffed by men, possible profiling by lending platforms using artificial intelligence algorithms, and a lack of appropriate financial products (GPFI, 2020a; OECD, 2018). Among best practices is the Women’s World Banking Initiative called “Making Finance Work for Women”, which works to raise global engagement towards women’s empowerment through digital financial services (Bin-Humam and Kelly, 2021). The G20 should encourage national policies and strategies that increase access to and usage of alternative digital financing opportunities. This includes creating incentives for digital financial services providers that facilitate WSMEs’ access to capital through crowdfunding and digital lending (Lyons and Kass-Hanna, 2022; Rigoni et al., 2022). It also should encourage efforts to identify and weed out gender and other biases in algorithms used by platforms to make financing and employment decisions. The G20 should also promote “positive” actions to redress gender discrimination and national strategies that encourage the hiring and advancement of women in leadership and decision-making roles in the financial, fintech, and digital sectors (Kulasksiz and Rafi, 2021; Kuroda et al., 2019). This includes increasing the representativeness of women working in positions that are responsible for making credit and funding decisions, as well as in “frontline” positions such as payment agents.

Recommendation 3: The G20 should support regulatory and legislative reforms and improvements in digital infrastructure that enable women to actively participate and run their businesses in the new digital entrepreneurship ecosystem.

The G20 should support policies that eliminate unequal legal treatment between men and women that hinders women’s entrepreneurship, working in coordination with its Employment Working Group and the G20 Alliance for the Empowerment and Progression of Women’s Economic Representation (G20 EMPOWER). Laws persist worldwide that limit women’s rights to work, start and run a business, open a bank account or obtain a formal loan, and/or own assets, property and inheritances, especially in many developing countries (Akinola, 2018; GPFI, 2020a; Joireman, 2015; World Bank, 2019). These legal restrictions have been found to negatively impact women’s bank account ownership, firm ownership, and labor force participation (Htun et al., 2019). It can become a vicious cycle. Gender differences in asset ownership can give rise to WSMEs’ lack of (traditional) collateral such as land and property, which in turn can affect women’s ability to access credit from banks and other financial institutions in order to jumpstart their businesses. Removing or amending the laws, which give rise to gender inequalities, such as removing barriers to opening financial accounts or starting a business, is a straightforward way to support and empower women entrepreneurs (GPFI, 2020a). At the same time, laws and regulations incentivizing women’s economic participation should be enforced and—where applicable—strengthened and enhanced over time. In conjunction with this, the G20 should encourage government administrators and policymakers to progressively break down persistent discriminatory social norms and practices that conflict with such efforts. This may include positive measures targeted at women to offset the disadvantages arising from existing attitudes, behaviors and structures, or even, to redress existing discriminations. Changing social norms and laws can be mutually reinforcing, with national-level or state-level legal reforms often acting as a precursor to drive social norms in the same direction over time.

Technological innovations accelerated by the COVID-19 pandemic have fundamentally transformed the way that businesses operate, but can also expose WSMEs to new risks, scams, and frauds (Lyons and Kass-Hanna, 2022). To this end, the G20 should support government efforts focused on developing and implementing more effective consumer protection measures that protect WSMEs, especially pertaining to digitalization. At the macro level, the G20 should support country assessments and policy efforts that promote partnerships between digital platforms, financial institutions, and fintechs, while at the same time, regulating the platforms and digital financial services and protecting data privacy and use. At the more micro level, specific consumer protection measures need to be designed and implemented that protect women entrepreneurs in relation to digital financial services (Lyons and Kass-Hanna, 2022; Morgan et al., 2020). Low-income women can be particularly susceptible to digital financial fraud, online privacy breaches, and other forms of cybersecurity risks given their relatively limited exposure and experience with digital finance and business platforms (e.g., Pervaiz et al., 2019). Besides direct consumer protection, indirect measures such as training and educational strategies customized for WSMEs are vital to prevent these threats. As such, the G20 should encourage country-level policies that require financial providers and fintech companies to clearly disclose the terms and conditions of digital financial services, especially digital loans. Clear and easy-to-understand digital financial product terms may be especially important for women entrepreneurs in developing economies, given their relatively limited financial knowledge, experience, and capability. Efforts to raise awareness and encourage the use of digital money in order to reduce safety-related concerns in the handling of cash are also needed.

Digital transformation can also greatly benefit women entrepreneurs by diversifying product options and boosting service speed, security, and transparency. To this end, improvements in digital infrastructure can assist women in running their businesses in the new digital entrepreneurship ecosystem (OECD, 2017). Building on the G20 High-Level Principles for Digital Financial Inclusion (2016), G20 members should take concrete actions to promote digital financial inclusion for WMSEs at their own country level. In addition to those previously mentioned in Recommendation 2, other actions can include: (1) removing regulations that prevent individual ownership of financial/transaction accounts, and (2) increasing investments in digital technologies and other infrastructure that offer affordable ways for women entrepreneurs (who are often financially excluded) to get a small business loan, send a remittance, or make a payment.

Conclusion

The G20 has long supported the advancement of global policies that empower women and reduce gender inequalities (e.g., G20 Women 20 Summit, 2021). This policy brief focuses on actions the G20 should take to empower women entrepreneurs who have been vulnerable to the digital transformation resulting from the COVID-19 pandemic. The G20 Presidency of Indonesia has identified digital transformation and women’s empowerment as priority areas. This brief provides recommendations to aid the G20, its Digital Economy Working Group, and the G20 Alliance for the Empowerment and Progression of Women’s Economic Representation (G20 EMPOWER) in digitally empowering WSMEs and in building a more digitally inclusive, equitable, and resilient society.

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Appendix

APPENDIX A1: G20 GENDER DIFFERENCES IN ENTREPRENEURIAL CONDITIONS

Total early-stage entrepreneurial activity (%) – Percentage of adults aged 18-64 who were either a nascent entrepreneur or owner-manager of a new business (i.e., the proportion of the adult population who either started or ran a new business).

Confidence in capability to start a new business (%) – Percentage of adults aged 18-64 who reported being confident in their capability to start a new business.

Starting a business in pandemic was more difficult (%) – Percentage of adults aged 18-64 who reported that starting a business was more difficult during the pandemic.

Pandemic provided new opportunities (%) – Percentage of adults aged 18-64 who reported that the pandemic provided new business opportunities.

APPENDIX A2: G20 GENDER DIFFERENCES IN FINANCIAL INCLUSION

The following table provides an overview of selected indicators related to financial inclusion and entrepreneurship, among selected G20 countries with focus on emerging economies. The gender gaps across countries are highlighted and areas that need to be prioritized in terms of policy actions and interventions can be identified.

The table focuses on three financial inclusion indicators, which tend to be the most relevant for women entrepreneurs and WSMEs. Data are taken from the World Bank’s 2017 Global Findex, a unique dataset that captures key financial inclusion metrics for over 140 economies. First, financial account ownership indicates the percentages of women and men for each economy who own a financial account. The gender gap in account ownership is also reported. The differences across countries are striking. The largest gap is observed for Saudi Arabia, where 80% of men have a financial account, while less than 60% of women do. In countries such as Turkey, China, India, Brazil, etc., women also lag behind men, although to a lesser extent. In other countries (e.g., Argentina, Indonesia, Russia and South Africa), men are surprisingly at a disadvantage compared to women. The wide range in values suggests that social and cultural factors may play a strong role in some countries. Policies in those countries with large gender gaps should thus focus on identifying interventions that could reduce gender inequalities in account ownership that may be due to social and cultural norms.

Second, the percentage of adults who borrowed to start, operate, or expand a farm or business shows that women are disadvantaged relative to men in almost all countries. This suggests that a common factor lies behind these gaps. Lower labour force participation rates among women are likely to be a key driving factor and need to be addressed through national employment policies.

Third, the percentage of adults who made or received a digital payment reflects a similar pattern to that related to financial account ownership. The gender gaps are considerably large for Saudi Arabia and Turkey, followed by India, which again suggests that social and cultural factors play an important role. Countries should thus focus on policies that increase the digital participation of women by addressing issues such as prejudices against women using mobile phones and the need for consumer protections that are specifically designed for women.