Growing a business is not easy, and for women firm owners the challenges can be acute, especially when they are poor and run subsistence level firms. In developing countries, 22 percent of women discontinue their established businesses due to a lack of funds, and women are more likely than men to report exiting their businesses over finance problems, according to the Global Entrepreneurship Monitor. Meanwhile, personal savings are a crucial source of entrepreneurial financing, and nearly 95 percent of entrepreneurs globally state that they used their own funds to start or scale up their businesses. Women, however, face unique constraints in accumulating savings to invest in growing their firms.
Women entrepreneurs are highly underserved by traditional financial institutions. They are often deterred from accessing traditional saving accounts by high transaction costs and implicit or explicit biases against female customers. In turn, they are sidelined to informal, less secure saving channels, such as cash savings, which they may divert to other uses because they face higher family and social pressures than men to share their cash. If women do accrue some savings despite these obstacles, another challenge to firm profitability and growth can be gaining the necessary business skills and financial literacy to scale their businesses.
Two recent randomized control trials (RCTs), one in Tanzania, the other in Indonesia, tested the impact of two interventions—separately and together—to address these constraints: a mobile savings promotion program to increase women’s access to and use of mobile savings accounts, and a business training program to improve financial literacy and good business practices.
In Tanzania, the savings intervention focused on easing demand-side constraints in women’s access to mobile savings products. It involved a training session for women microentrepreneurs on M-Pawa, a mobile savings account linked to M-Pesa that also gives customers access to microloans. Participants in the training created mobile savings accounts, set savings goals, and set up weekly SMS reminders to save. The business training intervention, designed by TechnoServe, offered 12 weeks of weekly group sessions that taught women standard good business practices, how to mobilize finance, the importance of personal effectiveness and perseverance, and the benefits of gender equality in society. An interactive mobile phone learning platform complemented the training.
In Indonesia, the savings intervention took a different approach, targeting supply-side constraints preventing women’s access to mobile savings accounts. It provided local bank agents with either ‘high’ or ‘low’ financial incentives for signing up new customers and trained all agents on the mobile savings product and the importance of targeting female customers. The business training intervention, designed and implemented by Mercy Corps Indonesia, provided female entrepreneurs with an average 3-hour session on financial literacy and mobile savings, complemented by three group mentoring sessions to reinforce the training.
The studies found that in both Tanzania and Indonesia the promotion of mobile savings worked (women increased uptake of mobile savings significantly) and, when combined with business training, had significant impacts on intermediate business and individual outcomes. In Tanzania, women who participated in the mobile savings intervention saved double using M-Pawa, were 14 percentage points more likely to receive a mobile loan, were 4 percentage points more likely to grow their business activities by operating a second business, and reported an increase in their household decision-making power, compared to the control group. Meanwhile, women who received mobile savings promotion and business training saved almost four times more on M-Pawa and were 16 percentage points more likely to obtain a loan compared to the control group. In addition, they increased their good business practices by six percentage points, worked two hours more a week, and increased their capital investments by 23 percent, compared to the women in the mobile savings intervention alone. These effects were observed 15 months after the training ended. Notably, the Tanzania results showed that women’s total savings balances did not actually increase, but rather, firm owners appeared to have shifted savings and loans from other sources (such as cash savings) to the more secure mobile platform.
In Indonesia, women served by high-incentive agents promoting mobile savings increased their total savings by seven percent, whereas women receiving business training increased their total savings by 11 percent, compared to the control group of women served by an agent promoting mobile savings under low incentives—although neither of these increases was statistically significant. Women in both interventions independently also increased their household assets significantly –by 24 percent for women in the high incentive agent group and 20 percent for women in the business training group. Women served by better paid bank agents and receiving training and mentoring increased their total savings significantly by 24 percent, increased their mobile savings balance by a statistically significant four percentage points, and reported being significantly more empowered in household decision-making. For a majority of the women these effects were observed a month or less after the last mentoring session, and, in this short-term interval neither intervention (independently or combined) influenced women’s business outcomes. The question remains of whether women’s increased savings will be invested in their businesses in the long run.
Together, these studies illustrate how easing supply-side constraints, by directly promoting mobile savings and by having more highly motivated, better paid agents do this promotion, contribute to boosting women’s mobile savings, and how easing demand-side constraints through business and financial literacy training can further amplify these effects on savings. The evidence also suggests that savings and mobile savings increase women’s household decision-making power. Yet, these intermediate effects are still not enough to increase women’s firm profitability and business performance in the short run. Is it only a question of time, and further accumulation of capital from savings (and loans) will trigger this business growth? Alternatively, are there additional constraints in the business environment where these women-owned firms operate that only more capital-intensive interventions will help overcome? Follow-up surveys in Tanzania and Indonesia should provide additional insights on these questions.