In Somalia, entrepreneurship is a driving force of the economy. It is estimated that 76% of all jobs come from entrepreneurial activities – and with the exception of large companies, women play a leading role in this.
In Somaliland, women own more than half of all family businesses. In Mogadishu and Bossaso, they own about 45% of established formal businesses.
Many Somali women say they prefer self-employment citing flexibility, freedom and independence. However, critical gender gaps in entrepreneurship remain; women have lower incomes than their male counterparts and are largely excluded from the most remunerative segments of value chains. So what’s holding women entrepreneurs back? To try to answer this question, we collected testimonials from entrepreneurs working in the livestock, dairy, fisheries, retail and trade sectors in Hobyo, Bossaso, Burao, Hargeisa and Mogadishu on the challenges women entrepreneurs face. This research is part of the recently concluded Somalia Economic Memorandum (CEM), which examined the constraints to be overcome to create more and better jobs for Somali men and women.
Across the sectors, three issues stood out:
Women do not have access to capital
“Financial institutions have made borrowing so restrictive that it is almost impossible for women to borrow. This is because, [banks] request either a guarantor or security in the form of an asset. Both are out of reach for women.” – Woman working in the fishing industry, Hobyo
Many women pointed out that land ownership and inheritance laws favor men, making it very difficult for women to qualify for bank loans. Some people explained that men do not like to be guarantors for women because they fear that women, who tend to be engaged in small-scale, low-income businesses, will repay their loans. Other women said they would not consider bank loans because of the cost and short repayment periods. As a result, most women rely on savings groups or loans from family and friends when they need money. However, the amounts they save and borrow are usually small, making it difficult to make large investments in their business.
Women’s businesses are concentrated in local daily markets
“Our market is very small and the number of women selling fish is very high. Therefore, our big challenge is in the market, and the fact that we don’t have the capacity to reach nearby markets where the fish is in high demand. – Woman working in the fishing sector, Hobyo
Across all sectors, women spoke of the challenges of operating in small local markets. In the dairy and fishing sectors, for example, women generally cannot afford refrigerators or refrigerated trucks. This means that they cannot store or transport their produce to nearby towns where they can get better prices and therefore are forced to sell their produce in the daily local market where there may be supply issues. surplus. Recent research in Ghana found that this type of “overcrowding” leads to lower demand for women-owned businesses and lower profits for women. In the livestock sector, female entrepreneurs described seasonal challenges. For example, during the Haj season, when the demand for animals is higher, men with larger holdings tend to sell to traders who export to countries like Saudi Arabia. This drives up the price of livestock, negatively affecting women who operate small businesses, trying to buy livestock to resell in local markets. It was clear that women operating in more limited markets are at a disadvantage in finding buyers and sellers.
Women’s businesses are often located in sub-optimal locations
“Most of the businesses run by women are small and most of them are based in the neighborhoods rather than the main town centre, so they have less interaction with suppliers and are often stuck with one supplier .” – Female business owner, Hargeisa
In all sectors, women described constraints related to the location of businesses. A combination of household and childcare responsibilities often required women to work close to home. In other cases, prohibitive requirements to pay one or more years’ rent up front and difficulties in finding a guarantor made it harder for women to rent desirable store space. As a result, it was not uncommon for women’s businesses to be concentrated on the outskirts of town centers or close to their homes, which impacted their ability to attract and reach customers.
After that ?
At the best of times – let alone in times of crisis like drought, pandemic or instability – women entrepreneurs often have to be creative and innovative just to make their business work. While more research is needed to determine how best to support women entrepreneurs in Somalia, innovations in other countries provide clues about the types of interventions that could help.
In Nigeria, for example, the Women Entrepreneurship Finance Initiative is piloting a digital cash loan to help women entrepreneurs overcome collateral constraints. In Ethiopia, micro-finance institutions under the Women’s Entrepreneurship Development Project used cash lending techniques to reduce collateral requirements for women applying for loans.
In terms of locating businesses, if the barrier is cost, offering subsidies or assistance with guarantees could help women obtain more optimal business locations. When cost is not the main barrier, but rather household and childcare responsibilities, then childcare interventions may be more relevant. In Uganda, for example, a study found that bringing a child to work is associated with a “baby profit gap” – 45% less profit for women.
As we search for solutions tailored to Somalia, the Africa Gender Innovation Lab is a great place to find further evidence from across the region on how to close the gender gap in income, productivity, of assets and agency. If projects want to better support women, they will need to think of innovative ways to address their most pressing challenges. As one male entrepreneur put it to Hobyo, “They [women] can do well, if given a chance.”
This blog is part of a series of blogs organized by the World Bank’s Somali Women’s Empowerment Platform to highlight evidence and solutions on empowering women and girls in Somalia. Read more blogs in the series: