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Islamic Finance

The Big Read: The female entrepreneurship experience in Egypt

This Q&A is with Prof. Alia El Mahdi, professor of economics at the Faculty of Economics and Political Science, Cairo University. It is part of Salaam Gateway’s International Women's Day 2020 series that is co-designed and curated by Nyra Mahmood, MD of UK-based Simply Sharia Human Capital (SSHC LTD), the publishers of the 2016 report "Women in Islamic Finance & Islamic Economy”.


1. Salaam Gateway: As women in Egypt struggle to find their rightful place in economic activity, how much of it is a priority for the Government to create an enabling environment for women entrepreneurs?

Prof. Alia El Mahdi: The government’s Micro, Small and Medium Enterprises Development Agency (MSMEDA) has  played a growing role in providing finance to micro and small entrepreneurs. In 1992 at the inception of MSMEDA’s predecessor, the Social Fund for Development, a minimum of 25% of all finance was allocated to female entrepreneurs.

MSMEDA provides help to the young or new labor market entrants or returning migrants to open new micro and small enterprises. Special emphasis was stressed on supporting female start-ups as a way to open up new work and income-generating opportunities for them.

Ever since and due to the interest of the Government of Egypt as well as the donor community, more financial and non-financial services were granted to women to strengthen their capabilities and chances to succeed and their enterprises to become sustainable. Over the years, the percentage of female entrepreneurs increased slightly from 9.1% of all entrepreneurs in 1998 to 12% in 2012 but then fell to 10% in 2018 (CAPMAS, LFSS 2018, Cairo).  

However, efforts by the government, the donor agencies and the non-governmental organizations to support female employment could not stop female unemployment rates from rising especially during economic and financial recessions and particularly after the political instability following the uprising of 2011.

2. What are your observations as the main barriers for women entrepreneurs in Egypt and what does the data say?

Based on extensive MSEs surveys 2003/2004 and 2011, several questions were directed to male and female entrepreneurs. The questions intended to help the researcher pore into the realities and difficulties confronting female entrepreneurs.

The responses noted that 70% of male entrepreneurs thought that females faced difficulties in the market. 30% of the male respondents stated that women faced special problems because of their gender. However, the most important problems as stated by all respondents were personal harassment, setting up the enterprise and marketing. Other serious difficulties encountered by female entrepreneurs were in managing the business, hiring workers, and marketing, getting financial services and securing contracts.

Social barriers to work in the market were relatively lower in 2011 than in 2003, as 57% of female entrepreneurs did not need to take permission from household members to work (38% in 2003). The husband, followed by the father, remains the main person with permission granting authority, if it is required. The community's role in granting acceptance is rather limited and insignificant.

In 2011, or after seven years of the first survey in 2003, more females heading micro and small establishments were present in the MSE community as entrepreneurs, and 78% of them felt empowered by their role, as opposed to 70% in 2003.

3. The Egyptian government is boosting micro, small and medium enterprises (MSMEs) in the county, considered to be a key indicator in stimulating the economy. The European Bank for Reconstruction and Development (EBRD) has provided $80 million for women-led small and medium-sized businesses in Egypt. Are these steps in the right direction? What other institutions could support women in Egypt?

The Government of Egypt has been working hard to strengthen the role of small entrepreneurs, especially as female unemployment rates have been extremely high, over 24%, in Egypt, which is more than three times higher than for males.

This situation comes as a result of several factors, the most relevant of which are: a) the government’s decision to reduce public hiring, which was the main absorber of educated female employment; and b) the slow growth rate of private employment in the large-scale enterprises as well MSEs and agricultural sector.

Consequently, being a self-employed or small employer became the last resort for females seeking work opportunities.

In 2017, the Central Bank of Egypt’s initiative to finance small and medium sized enterprises at a low interest rate of 5% was one of its channels. The initiative benefitted male as well as female entrepreneurs.

In addition, most of the NGOs working in support of MSEs seek to provide a significant part of their financing to females.

Different donor agencies providing financing to MSEs in Egypt set as one of their conditions that an agreed upon percentage of the fund goes to females, whether individual entrepreneurs or groups of women working together. MSMEs directly empower women and youth.

The MSMEDA, through its partnership with the UNDP, disbursed 11.2 billion Egyptian pounds as loans for 526,858 micro and small-sized enterprises, and created around 802,434 job opportunities. Women have highly benefited from this, accounting for 48% of the total number of beneficiaries. 45% of the total were in the age group between 20 and 35 years old.

The collaboration extends to building entrepreneur’s capacity to run their own projects. Between 2017 and 2019, MSMEDA held 510 training workshops on entrepreneurship, which benefited at least 11,947 participants.

As part of their partnership, UNDP is also working with MSMEDA to mainstream gender equality and women’s empowerment principles through MSMEDA’s policies and programs.

Therefore, the financial support of organizations such as EBRD, UNDP, and IFC, which target female-led micro and small enterprises, have notable impact on the growth in financing to females and on accelerating the general perception of ministries, public agencies, as well as NGOs in the same direction. Such orientation towards advancing female enterprises will help in creating efficient job opportunities, generating value-add and income.

4. According to the International Labour Organization (ILO) ‘Women’s Entrepreneurship Development Assessment Report,’ Egypt’s percentage of women entrepreneurs has been the lowest in MENA. Can you shed light on the kind of tailored support required to help women entrepreneurs achieve financial and personal independence?

Women in Egypt have been granted several rights in the constitution, the labor law and other various policies and strategies. But reality indicates that females are discriminated against in the labor market. The discrimination is perceived clearly outside the government/public sector, i.e. in the private sector only. The private labor market surrounds females with a relatively hostile and unwelcome work environment whether as entrepreneur or wageworker.

The different indicators and results of surveys seem to confirm the previous statement:

Egypt ranked 134th, out of 144 countries, on the Global Gender Gap Report from the World Economic Forum (WEF) for the year 2017. The report measures gender inequality gaps on an annual basis in 144 countries in namely four fields: economic participation and opportunity, education access, political empowerment, and health and survival.

The Middle East and North Africa is the lowest-ranked region in the Index with an average remaining gender gap of 40%, according to the report. Egypt ranked 10th among 17 countries in the Middle East and North Africa region.

Females’ economic participation is rather low as the labor force participation rate shows a clear disadvantage in her position.

The female’s share in employment shrank in comparison to her share in the Working Age Population and Labor Force.

In times of recession, as in the years 1998 and 2012, the tightness of the labor market was primarily reflected in the share of females in the workforce, which dropped substantially.

The privatization environment did not provide sufficient support to female wage-workers; and the restrictive prohibiting labor law articles, especially with regards female workers, made it difficult for them to find jobs in the private sector. If they did, then the wage differentials between male and female workers would be significant.

The decision to become self-employed or an employer was problematic due to lack of experience, social barriers whether in the community or in running the business, as well as financial limitations.

High female unemployment rates are the outcome of several factors. The most persistent factor is the extremely modest work skills. It is a mismatch between the educational output and the labor market requirements.

The female wage-worker in the government/public sector is the most likely one to reach the richest wealth quintile, while being Un Paid Family Workers or Self Employed /Employers has more possibilities with being in lower wealth quintiles.

 Females as participants in the labor force are discriminated against as a practice, as the female unemployment rates are more than three times higher than their male counterparts.  However, females tend to become part of the labor force the more educated they are.

Education raises the aspiration of females to work, earn their living and become financially independent. Coming from a richer family background helps in finding a job and reduces the likelihood of being unemployed.

Despite all the legal and institutional framework that support females’ right to work and earn equal to males, females are the first to be made redundant or to be refused as work applicants if the labor market is slow or going through recession. So the reality in the labor market is more dire than what the written laws and existing institutions imply.

Given the above-mentioned background that surrounds female employment in Egypt several recommendations are to be taken into account:

  1. Revisiting and smoothing the labor law and its restricting articles like the one offering two years unpaid leave after childbirth; or the article requiring that each enterprise that employs 100 females or more has to provide a special daycare facility for those who have children. Simpler solutions could be introduced so that those articles do not act as hindering articles to women employment.
  2. The skills acquired in technical and secondary schools as well as university should be revised drastically. New programs and specializations, more in response to labor market requirements, should be introduced. This change could be initiated by a dialogue between the different partners, the Ministry of Education and the business associations. The latter could suggest new required specializations and even provide technical support and training facilities to the students during their schooling.
  3. For those females who are illiterate or have modest educational background, training facilities should be encouraged to offer specialized training for females like developing craft skills.  This could open up new horizons for groups of females especially in rural areas.  If such skills are complemented by courses in management of a small business, they would be helpful for new small female entrepreneurs who did not get any prior skills and who want to lead their own business and become independent.
  4. Female-owned enterprises are characterized by limited capital and relatively low capital/labor ratio, therefore access to finance should target the areas of weakness such as the micro enterprises (less than 5 workers) and rural-located MSEs, all of which tend to cluster around the lower figures.  NGOs and financial institutions that adopt a development agenda as well as disburse micro and small finance should be strengthened to play a more vigorous role in lending and providing different packages of financial services.

5. According to the same ILO study, “the majority of women entrepreneurs in Egypt are motivated by the necessity to have income rather than the opportunity to start their own business.” How do we change the paradigm shift to an entrepreneurial mindset, where women are actively engaged in business and start-up communities because they want to develop ideas and innovate?

I guess at the beginning we must distinguish between the definition of enterprise and establishment.

Operating within an establishment means within a confined fixed space such as a shop, workshop, flat, room, kiosk etc. While an enterprise means either an establishment or out of establishment operation.

Thus, when we talk about micro and small entrepreneurs we have to distinguish between their modus operandi.

More than half of female entrepreneurs work outside establishments as street vendors, house maids, itinerant workers, etc. Their activities are marginal and mostly survival activities.

In the nineties and until the beginning of the new millennium a substantial percentage of women small establishments owners (one third or more) were inheritors of the business either from one parent or spouse. Thus, leading an enterprise was a way to generate income to sustain the family livelihood. 

However, with better education and the change in the economic environment which necessitated finding jobs not just for survival but also to improve their economic status, females started to change and talk about how to improve their businesses and make them more competitive.  

In fact, there are numerous examples of Egyptian female entrepreneurs who have succeeded in establishing flourishing businesses that are competitive locally, regionally and even worldwide. The success stories vary from leading industrial projects, to tourism, education, health, finance and other service companies, and to venturing into the ICT domain and its different sub-sectors.

Open-minded education, training, and awareness creation are basic ingredients for changing the mindset of women to become more active in the labor market and start their own businesses.

6. How much is the lack of access to gender-sensitive financial services a hinderance to women entrepreneurs in Egypt?

Financial inclusion performance in Egypt lags the world and the averages for the other lower middle-income countries, but it converges with averages for the Middle East countries.

According to the latest figures released by the World Bank in 2014, Egypt suffers in general from high levels of financial exclusion, where the outreach of formal financial services does not cover more than 12% of Egyptians and 14% of adults compared to 42.7% in the other lower income countries and 61.5% in the world.

In addition, only 9.3% of adult females have bank accounts, while this percentage is 9.2%, 36.3% and 57.2% in the Middle East, Low Middle income countries and the world respectively, according to the World Bank’s Findex.

Low financial penetration is significantly linked with the presence of a sizeable informal sector and high poverty and unemployment rates.

Therefore, financial inclusion is not just gender-based, but it is a general phenomenon.

The Central Bank of Egypt is currently taking several measures and policies to improve the performance of the financial sector and make it more inclusive for the population, especially to the low- and middle-income groups.

7. Microcredit is seen as one of the most successful economic development tools, but what has the real significance of this been on women entrepreneurs in Egypt?

Micro credit has been increasing in its outreach during the last twenty years especially with the establishment of the Social Fund for Development and the numerous commercial banks’ initiatives as well as the growing role of economic NGOs and business associations.

However, the surveys on micro and small enterprises still indicate that the outreach is rather limited to start-ups and does not reach more than 10% of the entrepreneurs (males and females).

As to finance directed towards working capital, the percentage is double as much. In this respect, the gender differentials are not significant. Thus, the problem is not gender-biased, but scale-based.

Two constraints still exist:

  • the access to finance for micro and small entrepreneurs;
  • the high cost of finance, namely the interest rates.

The micro enterprises that get funding from NGOs, foundations, and business associations pay interest in the range of 24%-34%, which is excessively high, compared to the Central Bank of Egypt’s initiative to finance small and medium-sized enterprises at 5%, or compared to the commercial interest rates to large companies, which is around 14%.

Personally, I do not think that microcredit is the most important economic tool as small entrepreneurs depend mostly on their own resources or other means of traditional informal finance at the start of their ventures.

Advanced education, technical specialized training, formality procedures, taxes, availability of working spaces/ location, growing demand are important determinants of success along with the availability of financial services at acceptable lending conditions.

8. What are the gaps and opportunities for technology and tech-related policies in supporting more women entrepreneurs in Egypt?

There are numerous initiatives to familiarize women entrepreneurs with new technologies

specially in the area of ICT.

The Central Bank of Egypt and its different initiatives are trying to achieve financial inclusion through introducing women to new and easy e-finance technologies.

TIEC, or Technology Innovation and Entrepreneurship Center, is also providing technical assistance to women entrepreneurs, who use technology as an assistive factor to commercialize their products. They focus on developing the logic side of the business. The program “She_leader” trains women on start-up methodologies. It operates in 27 governorates.

9. How do we create better representation of women entrepreneurs and participation in policy dialogue?

In Egypt, we have several organizations that care for women’s economic interests: the National Council for Women (NCW), MSMEDA and several business-women organizations, whose leaders are relatively active in this respect.

In addition, the committee of Small Enterprises in Parliament is concerned with creating an encouraging legal business environment for micro and small entrepreneurs, males and females. The committee’s deputy is a female MP who works hard along with other MPs to provide the necessary support to female entrepreneurs.

Any law that is related to the operations of small enterprises is discussed with the different stakeholders. I happened to lead the legislation of a new tax law for MSEs, and in the process of preparation I met with Parliamentary committee members as well as MSMEDA representatives and the NCW and numerous other stakeholders.

The Ministry of Social Solidarity has a special program called FORSA, or Opportunity, designated to help poor females become more productive instead of just waiting for meagre financial support.

Therefore, I think that women entrepreneurs are always present in policy dialogues related to their areas of work and livelihood.

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