The role of entrepreneurship in driving economic growth through job creation, innovation, market competition, social change, and wealth distribution is well evidenced. In this equation, women entrepreneurs are making a strong contribution. According to the Global Entrepreneurship Monitoring Gender Report (2021-22), globally, women represent about one in three high-growth and innovation entrepreneurs. These women entrepreneurs primarily belong to upper–middle-income countries that have high levels of gender parity in economic opportunity, health, education, and political empowerment.

On the flip side, sidelining women and its negative impact on economic growth and prosperity is just one, well established, dimension of the impact spectrum. Unequal societies also pay an enormous price in terms of instability. International evidence suggests that countries with 10 percent female labour force participation rate are 30 times more likely to experience internal conflict compared to countries with 40 percent female labour force participation rate.

Pakistan’s status on women entrepreneurship and economic opportunity warrants serious attention. Pakistan’s female labour force participation rate is about 23 percent. Owing to the social stigma associated with women’s economic activity, only 25% of female university graduates join the workforce. 1% of females are entrepreneurs compared to 21% males. These statics represent a highly unequal society, which is also captured in the Global Gender Gap Index (2022), where Pakistan ranks 145th out of 146 countries. The performance on economic opportunity and parity is 0.3, which means that women’s access to economic participation and associated pay offs stand at 30% compared to men.

The economic case for women’s economic empowerment is clear – if their participation is at par with men, Pakistan’s GDP could increase by 60% by 2025. Women entrepreneurship is potentially the fastest route to reduce gender economic gap. Government of Pakistan recognizes this and has introduced lending schemes for women led businesses, set targets for financial inclusion of women, and also passed legislation to improve work environment for women.

Access to finance is one of the key hurdles for women entrepreneurs, as they often struggle to secure loans and investments due to bias from lenders and investors. Additionally, women entrepreneurs often face limited access to networks, mentors, training, and market opportunities. The decline of SME credit in Pakistan over the past decade, accounting for only 5.9% of the total private sector credit, has further limited the resources available to women entrepreneurs, with women’s financing constituting less than 3% of SME credit. Overcoming these challenges requires targeted interventions and support to promote gender equality in entrepreneurship.

Karandaaz Pakistan recognized the critical need to address these obstacles and launched the Women Entrepreneurship Challenge in 2017, which evolved into Women Ventures Program in 2020. It is one of the largest private-sector led gender finance programmes in Pakistan and over 100 women led businesses from various sectors have benefited from it. In this journey, Women Ventures has entered into partnerships to expand the geographic outreach and create economic opportunity beyond key cities. National Bank of Pakistan is our first banking partner in this endeavor. Karandaaz will also hook innovation and technology to revolutionize the nano and small business segment. Several schemes are at the design board stage.

The Women Ventures Program has been an enriched experience for Karandaaz, which is the basis of its lending model for gender finance and improvement in the portfolio quality. The programme has helped its portfolio businesses survive the economic downturn caused by COVID, and also develop into mature business persons and institutions. Support in times of distress has been a key element of the business model that targets a segment that has been left behind. Its also evident that concessional terms will be required by women led businesses, atleast, in the first growth cycle, to be able to compete in the market. However, default is not gender specific business behavior. Instead it is driven by weak enforcement mechanisms and the intertwined absence of legal repercussions. Therefore, the role of the state in providing strong enforcement mechanisms will be key in controlling moral hazard and maximizing the outcome of such impact investments.

In conclusion, promoting gender equality in entrepreneurship requires a concerted effort from various stakeholders, including government, financial institutions, non-governmental organizations, and the private sector. Initiatives such as the Women Ventures Program are critical in bridging the gender gap in entrepreneurship and supporting the growth of women-led businesses in Pakistan. While there is still much work to be done, the progress made in recent years indicates a strong growth potential among women led businesses and their contribution towards a dynamic economy.

This article was first published in the Business Recorder supplement on 26^th June 2023.