According to a new World Bank report – Profiting from Parity, unlocking the potential of women’s businesses in Africa, women in Africa are more likely to be working than women in other regions, and almost 50% of women in the non-agricultural labor force are entrepreneurs. It is the only region in the world in which women are more likely to be entrepreneurs than men. This implies that countries seeking to harness the full potential of female entrepreneurs should turn to Africa to learn how.

The report noted that because wage opportunities are limited in Africa, men and women who might not be inclined to start a business become entrepreneurs. Due to this factor, they may not possess the right skills and capital necessary to build large organisations.  For women specifically, they become entrepreneurs out of economic necessity. Most times, they do not intend or have the skills to build large and successful companies. Their decision to start a business instead of seeking wage work is influenced by important constraints such as differences in skills, capital, networks, time and family formation, occupational opportunities, and safety.

However, women overwhelmingly choose to enter sectors with reduced opportunities for growth. They tend to cluster in sectors dominated by other women, such as retail and hospitality. They also have lower levels of available assets and capital to invest into their businesses. Furthermore, they are more likely to operate in the informal economy, less likely to adopt advanced business practices, and show less willingness to compete.

The good news is that there is a potential dividend to “crossing over” into male-dominated sectors. Female-owned enterprises operating in male-dominated industries are as large and just as profitable as their male-owned counterparts. They are also larger than those in female-dominated sectors. A female entrepreneur’s decision to work in higher-return sectors is not driven by differential access to education or finance but by social factors, particularly the influence of male role models and exposure to the sector by family and friends.

In terms of decision making, women make or are obliged to make different decisions than men because they are constrained by gender-specific factors that hinder the growth of their businesses. These constraints, related to the contexts in which women operate, their endowments, and household-related factors, influence the strategic decisions that female entrepreneurs make – which, in turn, lead to less productive outcomes. As a result, the report notes that, on average, women-owned firms post profits that are 34 % lower than male-owned firms, and have fewer employees and lower sales.

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Identified strategies to address these constraints, including psychology-based skills development programs to encourage more entrepreneurial mindsets, supporting women with savings mechanisms and providing large capital grants as part of business plan competitions.