PSD Blog - The World Bank Group

The greatest unexploited resource

When I was growing up I heard a lot of stories about my grandfather. He died when I was a child so my recollection of him is a little hazy, but one thing sticks out very clearly in my mind: he believed in educating his daughters.

Not a stunning revelation perhaps, but it certainly made him unique for his place and time. He was a Pakistani Muslim born early last century, with two wives, 10 children, and very little money. And he believed it was more important for his six daughters to gain an education than his four sons. His sons, he felt, would eventually find their way in the world, but his girls might need a little extra help to level the playing field.

The smart economics of educated women

Editor's Note: Jennifer Yip is a consultant for the World Bank Group's Doing Business team.

At an age when mothers admonish their children to finish their brussels sprouts, my mother issued warnings about the importance of getting a PhD if I wanted to gain the respect of my future husband. Those warnings were followed by the oft-repeated reminder that I should "marry well, so you don’t have to work if you don’t want to."

Twenty years and a couple of degrees later I’ve often wondered how those two pieces of advice go together. What is the point of getting an advanced degree if I eventually decide not to work? 

Do banks discriminate against women entrepreneurs?

Some studies such as Carter and Shaw (2006) show that the share of women among the self-employed is disproportionately small, that they run smaller businesses, that they are less likely to rely on venture capital and that their firms have lower debt-equity ratios. These differences in financing patterns could be due to two sorts of factors. First, bankers’ decisions about loan applications may differ across men and women whose businesses are similar in terms of solvency and creditworthiness (supply-side discrimination, associated with the work of economist Gary Becker). Second, male and female entrepreneurs may differ in terms of risk attitude, education, personal wealth, experience, etc., known as statistical discrimination. The challenge is to find out which of these (or both) factors hold.

A recent study by Muravyev et al. (forthcoming) attempts to do precisely this. The study is based on firm level data from the Business Environment and Enterprise Performance Survey (BEEPS, 2005), conducted in Europe and Central Asia by the World Bank’s Enterprise Surveys and EBRD.

Equal Pay Day

Today (April 28) is Equal Pay Day in the United States. The date of Equal Pay Day marks the additional amount of time an average woman in the U.S. must work to match the earnings of an average male worker from the previous year. Wait, think you just misread that? Then let me repeat it: to match the earnings of their male counterparts from 2008, women must work from January 2009 to April 2009.

What microfinance really needs: women's lib

I saw Muhammad Yunus speak a few years ago, and the thing that struck me most in his speech was his insistence on the power of microfinance to help increase the opportunities available to women. That's why the findings from a recent evaluation of microfinance in Sri Lanka in which female enterprises gained little from access to finance were troubling. A new study discussed in the most recent edition of the FPD Impact newsletter tries to explain why female-owned enterprises have such low returns to capital.

On speed-dating and sexism

For those of you who missed it, last week the World Bank held its biennial Financial and Private Sector Development Forum. One of the sessions was structured around the format of speed-dating. Instead of meeting prospective partners, however, participants learned about innovative projects and products. One of the presented products was something called the Doing Business Gender Law Library. In the interests of full disclosure, let me tell you that the Gender Law Library is very near and dear to my heart. And by that I mean my job consists of developing, adding to, and generally maintaining it. You can call me the Gender Law Librarian if you like – trust me, you wouldn’t be the first.

The Gender Law Library is an online database of laws impacting women’s ability to engage in business activities. We’re a little like Westlaw for women, for lack of a better analogy. The Library covers laws that regulate the employment of women, as well as those that affect female entrepreneurship. You’d be surprised how many areas this encompasses, I know I was. Things like maternity and child-care are covered, but so are legal capacity and all manner of family and property law.

Why don’t women rule the world?

Last week I wrote about the need for greater gender diversity in the financial sector, and ever since then I haven’t been able to escape it. Not so much the post itself, but the topic. It started off simply enough, with two comments and an email. That got me thinking, though – in journalism doesn’t three constitute a trend? Apparently the same holds true for blog topics, as I recently saw a story about the scientific benefits of having more women in finance on the front page of Yahoo. The piece, originally from ABC News, was entitled Should Women Rule the World? Putting aside that thoughtfully posed question, to which my response is: why not? I am forced to pose a question of my own: Why don’t women rule the world?

Microsavings for microentrepreneurs

Just what does it take to make a successful female entrepeneur in the developing world? At least part of the answer is that a woman needs a relatively effective way to save money. A new paper on Savings Constraints and Microenterprise Development reports on the results of an experiment in Kenya that provided zero-interest savings accounts to village microentreprenuers:

...formal savings accounts had substantial positive impacts on business investment for women, but no effect for men...roughly a 40% increase in average investment, four to six months after the opening of the account.

Apparently, women who keep their savings at home - either in the form of cold, hard cash or assets like livestock - have a more difficult time than men at turning that money into a productive investment. Although the problem could be that women may be "present-biased" - economists' jargon for have-to-have-the-new-handbag-now behavior - I am more inclined toward another explanation:

...many women in developing countries face constant demands on their income (from relatives or neighbors), and it may be difficult to refuse requests for money if the cash is readily available in the house.

Whichever explanation you prefer, the results are compelling: access to savings vehicles is probably just as important as credit in facilitating the development of female-owned microenterprises.

Too much testosterone on Wall Street

Editor's Note: Sarah Iqbal is a consultant at the World Bank, currently working on the Doing Business Gender Law Library. Previously, she worked as an attorney in California.

Writing in the New York Times columnist Nicholas Kristof opines on the benefits of having greater gender diversity in the financial sector:

At the recent World Economic Forum in Davos, Switzerland, some of the most interesting discussions revolved around whether we would be in the same mess today if Lehman Brothers had been Lehman Sisters. The consensus (and this is among the dead white men who parade annually at Davos) is that the optimal bank would have been Lehman Brothers and Sisters.

Wall Street is one of the most male-dominated bastions in the business world; senior staff meetings resemble a urologist’s waiting room. Aside from issues of fairness, there’s evidence that the result is second-rate decision-making.

The basis of his argument comes from studies pointing to greater gender diversity as mitigating increased risk-taking behavior. According to one such study peer pressure leads to male herding behavior in financially pressurized situations resulting in high risk bets. Women’s propsensity for risk-taking, however, seems immune to this type of pressure. So is it just me, or does the crux of Kristof’s argument boil down to there being too much testosterone on Wall Street?

Innovations for poverty action

One more worthy participant has just entered the blogosphere. Innovations for Poverty Action, a research outfit dedicated to the use of randomized controlled trials, has just launched a website as well as a blog. I plan on watching this one closely.

The work of IPA spans multiple fields, but for the private sector-inclined, make sure to check out Are Women More Credit Constrained?, which found that returns to capital were higher for male rather than female-owned microenterprises, and What’s Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment, which found that "creative content" can have a substantial impact on consumer credit demand.