A recent study highlights how promoting female entrepreneurship can greatly enhance women’s workforce participation. By creating more opportunities for other women, female-led businesses can drive significant market advancement, it says.

Imagine a globe where women, though half the population, own less than a fifth of businesses.

This is the reality the globe lender uncovered in a survey spanning 138 countries from 2006 to 2018.

Even more intriguing is how female-owned businesses empower other women.

In male-owned firms, only 23% of workers were women, but female-owned businesses employ far more women. And while just 6.5% of male-owned businesses have a woman as the top manager, over half of female-owned firms are led by women.

• Why are millions of Indian women dropping out of work?

In India, the circumstance is even more challenging. Female labour participation and entrepreneurship are low, with the total number of women in the workforce barely changing over the history 30 years.

But the picture looks slightly better when it comes to entrepreneurship.

Women make up about 14% of entrepreneurs and own a significant distribute of micro, tiny, and medium enterprises (MSMEs). They contribute notably to industrial output and employ a substantial portion of the workforce, according to the 2023 State of India’s Livelihoods update.

Most MSMEs in India are microenterprises, with many women-owned businesses being single-person ventures, according to Niti Aayog, a government ponder-tank. While some women-owned enterprises employ staff in large numbers, a large majority operate with very few workers.

So Indian women are not really under-represented in entrepreneurship, but they operate much smaller firms than men – especially in the informal sector.

Not surprisingly, women’s contribution to India’s GDP is just 17%, less than half the global average. And India ranks 57th out of 65 countries for women’s entrepreneurship, according to the Global Entrepreneurship Monitor update 2021.

A recent document by Gaurav Chiplunkar (University of Virginia) and Pinelopi Goldberg (Yale University) argues that promoting female entrepreneurship could significantly boost women’s workforce participation, as female-led businesses often make more opportunities for other women.

The authors developed a framework to assess the barriers women in India face when entering the labour force and becoming entrepreneurs.

They found substantial obstacles to women’s employment and higher costs for female entrepreneurs when expanding their businesses by hiring workers. Their simulations showed that removing barriers would boost female-owned businesses, boost women’s workforce participation, and drive economic gains through higher wages, profits, and more efficient female-owned firms replacing less productive male-owned ones.

So, policies that back female entrepreneurship are crucial, the authors debate. Policies that boost entrepreneurship and boost labour demand – allowing more women to become entrepreneurs – can be more effective – and quicker – than changing long-standing social norms, says Mr Chiplunkar.

“history tells us that norms are sticky,” says Ashwini Deshpande of Ashoka University.

Women still shoulder most household chores – cooking, cleaning, laundry, childcare, and elder worry. There are more barriers, including limited access to secure, efficient transportation and childcare, restricting their ability to work within commuting distance. Even women’s limited ability to trip independently is a key factor restricting their participation in the labour economy, as shown in a recent study led by Rolly Kapoor of University of California.

Despite a recent uptick in India’s women’s labour force participation, the picture is not as promising as it seems, as Ms Deshpande notes in a document.

The boost, she found, reflected an boost in self-employed women, a combination of paid work and disguised unemployment, a circumstance where more people are employed than actually needed for a job, resulting in low productivity.

“There is an urgent require to boost women’s participation in regular salaried paid work with job contracts and social safety benefits. This would be the most significant step, albeit not the only one, towards women’s economic empowerment,” says Ms Deshpande.

It’s not going to be straightforward. For one, many women face obstacles – from families and communities – to working at all, regardless of whether they desire to be entrepreneurs. And if more women join the workforce but there aren’t enough jobs – because barriers to starting businesses remain – wages could actually drop.

Research shows that women in India work when opportunities arise, indicating that the declining labour force participation rate is a outcome of insufficient jobs and reduced demand for women’s labour. A recent Barclays Research update says India can reach 8% GDP growth by ensuring women make up over half of the recent workforce by 2030.

Boosting female entrepreneurship could be a way out.