Catalysing Women Entrepreneurship and Financial Inclusion in Pakistan
Gender disparity in Pakistan exists at various levels despite not being present in the population divide. The Global Gender Gap Report of 2016 ranks Pakistan at 143 (out of 144) in the world in terms of economic participation and opportunities for women. Several socioeconomic indicators—employment, business and asset ownership, financial inclusion—contribute to this ranking, making it a complex and rather sticky number to shift as it has remained unchanged from 2015. Karandaaz Pakistan, is launching a program focused on supporting female entrepreneurs through the Department for International Development (UKAid) funded Innovation Challenge Fund.
Figure 1: Female Economic Participation
Nearly half of all Pakistanis are female . However, only 25% of the roughly 90 million females actively participated in some form of labor in 2014. As evident from Figure 1 above, the gap between Pakistan and the South Asia average for labor force participation has decreased. A cursory look at the numbers indicates a positive trajectory. However, in-depth review of the statistics reveals that most of this growth comes from the agriculture sector (increase from 67% to 75%) whereas the share of women in industry, services and wage and salaried work decreased by 3.6%, 4.6% and 6.6% respectively from 2004 to 2013. This decline is despite the fact that adult female literacy increased by 7% between 2005 and 2015. This hints at a missed opportunity. We have more educated females but we have less who are contributing to the economy across various value added sectors.
The Gender Gap
Last year, UN Women published the Women’s Economic Participation and Empowerment in Pakistan status report (2016). The report looks at various factors that represent a gap between the genders. The UN Women report elaborates that policies in Pakistan and subsequent initiatives focus merely on generation of income rather than economic inclusion targets for women. This short term focus results in one-off initiatives and greater unskilled labor employment rather than entrepreneurship or highly skilled jobs. A more sustainable solution, financial inclusion of females is also highlighted in the report, linked with deeper inclusion of women in the formal economy, allowing them to generate sustainable livelihoods.
Figure 2: Financial Access of Women in Pakistan
However, in Pakistan, as seen in Figure 2 above, only 5% of women have a bank account and only 13% of women are able to borrow from microfinance institutions. This is linked to the fact that a low percentage of women have ownership (joint or otherwise) of physical capital (2% of complete and 7.4% for partial ownership) which is mostly a requirement as collateral by other formal financial institutions. Such situations encourage using informal means of financing. Greater access to formal finance can improve economic empowerment and allow an increasing number of women to participate in the formal economy. Interestingly, it can be argued that better financial access is both a cause (the ability to make decisions) and a result of economic participation (if women are working or participating, it should incline them to maintain their own accounts). Similarly, a report, Financial Inclusion of Women in Pakistan (2016) states that employment is often tied to banking as wages need to be received. Simply put, greater economic opportunity through employment or entrepreneurship can be a driver for financial inclusion.
The UN Women report recommends that there should be incentives for enterprises that have considerable women employment, have women decision makers or are owned by women. The report also recommends improving ownership of physical assets, technical and management training, improved working conditions for women, and financial inclusion through support to banks. The Financial Inclusion of Women in Pakistan (2016) report supports these focus areas and highlights limited mobility, banking regulations, property rights and collateral and financial literacy as some of the barriers to financial inclusion.
Supporting Female Entrepreneurs through Karandaaz Innovation Challenge Fund (ICF)
During the scoping exercise for the second round, Karandaaz Pakistan consulted numerous incubators and accelerators to assess participation of women entrepreneurs. Across the board, what we heard was very similar: firstly, not many female entrepreneurs (or aspiring entrepreneurs) apply for incubation programs or start-up competitions. Secondly, even if they do, dropouts are high and eventually only a few graduate; an even smaller number launch their own businesses. Limited mobility is a problem, there is a lack of tailored programs for female entrepreneurs and finally (and maybe most importantly), start-up funding is difficult to identify and secure.
In an effort to identify, mobilize and pilot solutions to especially chronic challenges, Karandaaz Pakistan leverages it’s Innovation Challenge Fund (ICF), a Department for International Development (DFID) sponsored multi-million Pounds, fund. In keeping with its name, the ICF is structured as a challenge. Each round of the ICF is centered on a pre-identified challenge and innovative solutions are invited in an open competition. The upcoming challenge under the ICF will provide an opportunity to chip away at some of the challenges faced by women entrepreneurs, especially in the ambit of financial inclusion and female participation in the economy.
The objectives of ICF round 2 (ICF2) are not only to support female entrepreneurs but also build the capacity of incubators to continue improving female economic empowerment in the future. ICF2 will give the implementers an opportunity to try out innovative new programs that will help them increase uptake and launch women led enterprises in the future. Karandaaz is also looking to explore some of the basic factors that determine entrepreneurial success in Pakistan for women and highlight some of the major challenges they face. The findings from the pilot programs and launch of new businesses can help develop insights into a better start-up ecosystem for female entrepreneurs. There are several other start-up competitions in Pakistan; one such competition is run by Karandaaz itself (Fintech Disrupt Challenge), but there is a lack of dedicated competitions for female entrepreneurs. Also, competitions like the Karandaaz FDC and HBL Innovation Challenge are focused on financial technology or Fintech’s which are seen as an integral vehicle to greater financial inclusion in the digital age. However, the ICF2 is a dedicated competition for female entrepreneurs and at the most basic level, aims to support SME’s in Pakistan for greater financial inclusion. Details of ICF2 can be found on the dedicated Karandaaz webpage.
-  48.6% of 188.9 Million Pakistanis were female in 2015 (World Bank)
-  http://data.worldbank.org/indicator/SL.EMP.TOTL.SP.ZS?end=2014&locations=PK&start=2004 .
-  http://asiapacific.unwomen.org/en/digital-library/publications/2016/05/status-report-on-womens-economic-participation-and-empowerment
-  From 35% in 2005 to 42% in 2015 (World Bank)