WOMEN ENTREPRENEURSHIP STRATEGY IN ARMENIA

WOMEN ENTREPRENEURSHIP STRATEGY IN ARMENIA Elaborated in the frame of the ADB financed ARMENIA: WOMEN S ENTREPRENEURSHIP SUPPORT SECTOR DEVELOPMENT PROGRAM Project Number: RRP ARM 45230 for SMEDNC, YEREVAN / ARMENIA by Frank Wältring 30 SEPTEMBER 2013

Table of Content I. INTRODUCTION: THE OBJECTIVE OF THE WOMEN ENTREPRENEURSHIP STRATEGY 3 II. THE SYSTEMIC FRAMEWORK FOR ANALYSIS USED TO IDENTIFY MAIN CONSTRAINTS OF FEMALE ENTREPRENEURS IN ARMENIAN SOCIETY 4 III. THE ROLE OF WOMEN IN THE ARMENIAN ECONOMIC DEVELOPMENT 6 III.1. MACRO-LEVEL AND MACRO DATA FINDINGS AND CHALLENGES 6 III.2. AREAS OF EXISTING AND NEW FEMALE BUSINESSES IN ARMENIA 8 IV. SYSTEMIC INTERVENTION OPPORTUNITIES TO INCREASE WOMEN ENTREPRENEURSHIP IN ARMENIA 9 IV.1. MICRO LEVEL FINDINGS AND CHALLENGES 9 IV.2. MESO LEVEL FINDINGS AND CHALLENGES 10 IV.3. META LEVEL FINDINGS AND CHALLENGES 11 V. AREAS FOR SYSTEMIC INTERVENTIONS TO PROMOTE WE 12 VI. DESIGN OF IMPACT INDICATORS AND AN ACTION PLAN FOR THE PROMOTION OF WOMEN ENTREPRENEURSHIP IN ARMENIA 14 VI.1. IMPACT INDICATORS ALONG THE FINDINGS 14 VI.2. ACTION PLAN DESIGN (DRAFT) ERROR! BOOKMARK NOT DEFINED. 1

Abbreviation list ADB CBRD EBRD GGI GII OSCE SBS SME SME DNC USAID WE WES WiB Asian Development Bank Centre for Business Research and Development European Bank for Reconstruction and Development Gender Gap Index Gender Inequality Index Organization for Security and Co-operation in Europe Small Business Support Small and Medium-sized Enterprises National Agency for the Promotion of Small and Medium-sized Entrepreneurs United States Agency for International Development Women Entrepreneurship Women Entrepreneurship Strategy Women in Business 2

I. Introduction: The objective of the Women Entrepreneurship Strategy In 2011 the National Agency for the Promotion of Small and Medium-sized Entrepreneurs (SME DNC) has developed a comprehensive SME strategy which has started to become implemented during the last 2 years. The overall strategy also entailed a chapter on Women Entrepreneurship (WES). It was mentioned that WES should become a cross-cutting aspect of the overall SME promotion approach. With the support of the development program of the Asian Development Bank (ADB Womens Entrepreneurship Support Sector Development Program, RRP ARM 45230),SME DNC has started in 2013 to develop a more comprehensive Women Entrepreneurship Strategy. Its overall objective is the increase of women s participation in the overall economic development of Armenia. The stronger participation of women in economic life will play an important role for income generation and growth as well as for the equality of development opportunities for men and women in Armenia. Especially for the development of SMEs as the backbone of the Armenian economy it will be an important task to integrate more women into businesses as qualified employees as well as entrepreneurs. The topic of WES already got more attention during the last 3 years. The government itself emphasized their interest in promoting Gender equality in Armenia. In 2010 it accepted the strategic plan of Gender Policy 2011-2015. It especially emphasized in this strategy the finance of gender projects and help small and medium enterprises, whose owners are women as well as to increase credit programs for women. But apart from national strategies and agreements the challenge of supporting women as start-ups and as small and medium-sized enterprises (SME) is on the implementation side. Real support programs from the government do not yet exist at present, and support institutions and donors will need more comprehensive information of the concrete business needs of women as potential and existing businesses. Apart from more comprehensive information it requires an alignment about most relevant intervention areas as well as the distribution of supporting roles and tasks to be able to support women in the most effective way. SME DNC has tried to consider women and men as balanced target group in their SME support activities. But with increasing gender awareness and the increasing role of considering women as business actors it will be important for the Agency to align their own efforts as well as the ones from donor and government projects. Thus this strategy also has the objective to identify jointly right entrance points to increase the number of female businesses and qualified female employment opportunities. It will support this direction through providing a basic framework for concrete actions that will react on potentials and certain bottlenecks women face in the development of their own businesses and in regard to their position in production lines, value chains respective business sectors and the society. 3

This strategy provides an insight into main systemic bottlenecks women face in Armenia to become entrepreneurs. Based on this information main intervention areas, indicators and an action plan will be defined. It is the basis for further activities to align the work between SME DNC, donors, and other supporting organisations in Armenia. II. The systemic framework for analysis used to identify main constraints of female entrepreneurs in Armenian society In more developed countries women play an increasing role in shaping the competitiveness of the countries and regions. During the last 40 years many promotion activities have been initiated worldwide to change stereotypes and patriarchal role models. In difference to OECD countries, where female business ownership is rather high (around 40-45%), in Armenia this is rather low with estimations around 13% 1. For the promotion of Women entrepreneurship in Armenia it will be important to understand the difficulties women face to open and keep their own business. The reasons are systemic, which means they are not only tackling the business level or 1 In Armenia the research on women entrepreneurship is just starting. Not many assessments have been made. This strategy is mainly based on the data of following 2 assessments from Armenia: 1) Business Pareta LLC: Analysis of Women s Involvement in Business of the republic of Armenia, for the period 2010-2012, 2) Nora Alanakyan: Assessment of needs for business development services among micro and SME women entrepreneurs of Armenia, Yerevan 2013. Both papers have been supported by SME DNC. 4

due to a lack of support for female businesses through support programs and policies. There are also societal and stereotypes and role models involved which have to been considered for successful support measures. This strategy chooses thus systemic framework of analysis. The systemic competitiveness framework looks at different levels that influence the role of women in economic development. The framework was also used for the design of the SME strategy in 2011 and helps to identify interdependencies between different causes and effects. At the meta level (which can be interpreted as the socio-cultural level) often dominant role models exist, in which women play an important family role. Women also play an important social role in communication between families and friends. These traditional roles leave the responsibility for economic income generation mainly to the male members of the family (see also box right). In how far do these societal aspects play a role in Armenia? One of the requirements of the strategy is to identify more information on the socio-cultural gender role models and patterns in this respect. Every entrepreneur, either female or male, requires a supporting infrastructure as well as services that are relevant to be competitive in the market (meso level). Basic data for the design of support programs at the policy level need to be in place to overcome market failures or political constraints (macro level). Also at the business level (micro level) producers and entrepreneurs require skills and strategic competences, market knowledge and business networks that provides additional information and power. The graphic above demonstrates some typical areas of constraints for women as entrepreneurs at the different competitiveness levels. In general it can be said that in many transformation stages of countries like Armenia with a relatively high level of education of males and females, gender consideration is not a dominant priority. Priority is firstly given to the improvement of generic SME policies (macro level), support programs and services for SMEs overall (meso level) and of concrete interventions to overcome market failures for all SMEs. Disadvantages for women as entrepreneurs get more attention at a later stage when more women move into business and identify and express their constraints and where traditional role models start to change in society. This often goes hand in hand with an increasing self esteem of women in their position at work and within the family. The next chapters will more precisely look into the systemic aspects for the promotion of Women Entrepreneurship 5

III. The role of women in the Armenian economic development In Armenia there exists a lack of data on women involvement in economic development. During the last year international and national studies put emphasis to a more comprehensive understanding of the position of women. It has to been differentiated between rather general international benchmarking studies and studies on the ground in Armenia. The latter provide much more detailed information although they have to been interpreted as first basic insights which need to be followed up during the upcoming years. III.1. Macro-level and macro data findings and challenges International benchmarking studies like the Human Development Report and its Gender Inequality Index (GII) 2 from UNDP as well as the Gender Gap Index (GGI) 3 from the World Economic Forum can provide very generic data and some information on trends and key relevant macro level aspects. According to the Gender Gap Index Armenia is listed Nr. 92 on a list of 135 countries worldwide. It did fall back during the last years in comparison to other countries. This GGI index looks at indicators (see table below) like economic participation (Armenia rated Nr. 76), educational attainment (Nr. 25), health and survival (Nr. 130) and political attainment (Nr. 114). The Gender Inequality Index (GII) from the UNDP ranks Armenia as Nr. 59 from 148 countries. The different rating results are related to different ways of measuring Gender. Nonetheless they both demonstrate common findings. Both rate positively the high balance of males and females in education, including secondary or higher education degree (around 94% of female and male participation). When it comes to other factors that are related to real access to resources and power (like female seats in parliament, Rank 104 in GGI index) or wage equality (ranked 108 in the GGI), Armenia is quite behind in regard to balanced access to and power over economic resources (see table below). 2 See http://hdr.undp.org/en/statistics/gii/ 3 See http://www3.weforum.org/docs/wef_gendergap_report_2012.pdf 6

The macro data judgement just provide a generic impression. It emphasizes the need for more comprehensive policies to provide basic Gender equality in Armenia. Like mentioned in the introduction, the national government has accepted the Gender Policy Strategy but implementation has not made much progress since 2010. Current published Armenian studies (see footnote 1) on Women entrepreneurship provide more concrete insights. They all mention the weakness of data on SMEs overall but especially the lack of concrete data about female businesses. Existing official statistics just provide information about female or male registration of the business. The latter does not provide a real insight about the real business ownership itself and the management or employee structure of the business. Apart from more comprehensive data, there is the need for a more realistic definition to which supporting organisations and donors commonly agree SME DNC introduced the following definition for analytic purposes which could become the basis for communication for a future common definition: Women Enterprise is a registered enterprise where: (a) More than 60% of the top management are women (women-managed enterprises WME), or (b) More than 50% of ownership belongs to women (women-owned enterprises WOE), or (c) More than 50% of employees are women (women employing enterprises WEE). The existing supported by SME DNC use this definition as a reference, other research studies use still the registration information as basis of their analysis. According to statistic data, 55% of women and 73% of men are economically active in Armenia. When it comes to the analysis of women as entrepreneurs the statistical data refers to 32% of women as registered owners of enterprises. This percentage does not, according to studies, represent the reality. It seems to be common practice that men often register their wives and daughters as owners due to the fact that they have either already registered another business themselves or to reduce the risks of debt payments due to the low income and financial reserves of the wife. Additionally there is an incentive to register a female business if funds are available for women. This is especially related to donor programs. National studies thus provide estimations through rather counting the enterprises where women are not only the owner of the business but also managing the same. The studies accordingly mention 13% of real female business. 4 5 4 See Business Pareta LLC (footnote 1), p.14. 5 See Alanakyan (footnote 1), p.20. 7

III.2. Areas of existing and new female businesses in Armenia According to existing data women are mainly active as entrepreneurs in areas with low barriers of entry, where it is easy to duplicate businesses, often with a lack of long-term competitiveness, low specialisation and within already saturated markets. Specific fields of female businesses In services like beauty salon, repair/tailoring, catering, design center, gym, educational services, etc. In trade like food, household items, clothing, resale of cosmetics, hygienic products, etc. In agriculture like cattle-breeding, Horticulture, Cultivation of vegetable crops, small number of food processing, etc. In production like clothing, confectionery, bakery Role of women in Start-up development Due to the fact of the low number of female businesses in Armenia (see above, 13%) it will be important to promote potential female entrepreneurs for increasing their participation in the overall economy. During the last years SME DNC has supported the promotion of new start-ups in many communities often after identifying also business opportunities. The analysis of this data demonstrates that in 2011 and 2012 around 40% of the overall applications for opening a business came from women. 6 But the number of female businesses who get finally registered is much lower. In 2010 only 27,3% of the applications led also to registered businesses, in 2012 even only 20,5%. The reasons for non registration is often the lack of innovative ideas. The number of new start-ups in a society as well as the percentage of women involvement as workers and employers in the overall economy normally demonstrates a dynamic indicator for the development of an economy. Taken the above numbers into consideration, it becomes obvious that Armenia has to strengthen their efforts to support women with business skills to create sustainable employment. Also the promotion of more innovative businesses will be necessary for this objective. Most of the existing female businesses are rather related to areas of work where the society accepts the role of women. The businesses are at the same time located in sectors where the markets are rather saturated and where 6 See Business Pareta LLC, p. 8. 8

higher competition leads to reduced income. The above means that, apart from the political requirements for support mentioned above, it will be necessary to strengthen Women entrepreneurship through the access to better business services, a stronger organisation of female businesses as well as through a more target-oriented support of (potential) female businesses through institutions, donors and government programs. To reach this end it will be important to develop more coherent and systemic interventions at the meso and micro level. It will also be important to create a new picture in society about the value of Women entrepreneurship for the development of the country. The latter requires work at the meta level, changing the traditional role models and integrating more potential and innovative female businesses into the economy. The following chapter will especially focus on a deeper reflection of requirements at the micro, meso- and meta level. Based on these findings an action plan will be developed. IV. Systemic intervention opportunities to increase Women entrepreneurship in Armenia IV.1. Micro level findings and challenges The data on participation of SMEs in GDP differs in different studies and lies around 40% 7 or 30% 8 in 2010. Most of the SMEs are active in trade (44%) and the service sector and only 21,9% is based on industry. 9 Especially in small enterprises labour productivity is low. At the same time entrepreneurship education is completely absent in the education system in Armenia. 10 Also value addition in the production sector is relatively low due to the lack of new technology, value-added production and business management and production skills. It means that in general competition challenges for men and women businesses in Armenia are relatively high overall. Specific weaknesses of women in businesses can be mention in the following areas: General knowledge on entrepreneurship related to practical business experience and market information. This becomes obvious in the selection of business ideas which are often oriented towards sectors where it is easy to duplicate business. These are in general also sectors with a lower knowledge barrier to entry. They mainly focus on trade of basic products and the provision of basic services. They enter into markets with a relatively high saturation and high price competition In the service sector female businesses are in general more active in less 7 www.smednc.am 8 See National Strategy for Small and Medium Entrepreneurship Development 2011, Chapter 9, p. 3. 9 See above, p. 3. 10 See National Strategy for Small and Medium Entrepreneurship Development 2011, Chapter 5, p.5. 9

knowledge-intensive areas which are also less demanded on the market (see also business areas above) Detailed weaknesses are related to accounting, tax and finance advise, business management, marketing, leadership skills and specific technical knowledge. 11 When it comes to outside business contacts and networks and business supplier and buyer relations, women are in general marginalised especially due to the lack of time related to their double role as mother and housewife Female businesses play a weak role in production sectors and thus also a weak role in value-added production and in related value chains. Within value chains they are rather involved as employees when it comes to the agricultural sector, industry or trade. Key challenges for the promotion of women entrepreneurship at the micro level One of the main challenges for women entrepreneurship promotion in Armenia in the near future will be to promote their opportunities in more knowledge intensive services, in the value addition of production sectors (like e.g. further processing of agricultural products) as well as in the development of new and further processed products in the manufacturing sector. These areas seem to provide entrance points to increase the business opportunities as well as the sustainability for female businesses. Nonetheless this would require a strong support by supporting institutions as well as the change of stereotypes about the role of women in the Armenian society. IV.2. Meso level findings and challenges The institutional infrastructure of organisations and BDS services in Armenia is still very weak. There are several private BDS services existing in Armenia. Nonetheless the dominant role for the provision of services is played by SME DNC as the National SME Agency. Its role becomes even stronger in the rural areas where nearly no services exist apart from Chambers providing some trainings on business planning and anti-corruption offices. SME DNC supported during the last years trainings on start-up promotion, business planning, tax advise and accounting. SME DNC does this work because there is nearly no services and support organisations in the countryside. Despite their efforts, they cannot satisfy the demand in general for SMEs and also not the demand for female entrepreneurs. Apart form national organisations there are also donors who have started to support the economic and political empowerment of women. USAID/EDMC has developed a new support product. The Centre for Business Research and Development (CBRD) designs and implements a variety of studies and research projects including but not limited to a start-up program for women. 11 See Business Pareta LLC p. 14. 10

The OSCE has started to promote Women s Resource Centers Network in Syunik providing resources to help them start businesses. Besides offering trainings and consultations, the centres conduct different surveys and assessments, arrange contacts with various agencies and provide a variety of low cost services to local women. EBRD has supported during the last years women economic development in Armenia with their project Small Business Support (SBS) and Women in Business (WiB). Here they provided several services for new and young female businesses like coaching, mentorship, business trips etc.. EBRD has also started to extend Business Advisory Services, especially for the support of financial institutions that provide support to female businesses. Another important stakeholder in Armenia who is expressing female business interests is the Armenian Young Women s Association (AYWA). The association has a strong role in promoting female businesses and networks in the rural areas outside Yerevan. They have supported also concrete income generating projects like Green House Laboratories, Entrepreneurship awards for female businesses, and trainings and seminars on business topics especially in the rural areas. For increasing the future impact of the support activities it will be important to promote the coordination between the different active stakeholders and to align their common direction. Key challenges for the promotion of women entrepreneurship at the meso level First existing service needs surveys 12 for female entrepreneurs demonstrate that the areas of demand for business services of female entrepreneurs is very similar to the one of male businesses. In Armenia the challenge for the promotion of women entrepreneurship is thus less so the kind of services but the access to services in general. It will be important to follow a more inclusive approach. Female businesses need to be more included in the existing services as well as the services for SMEs overall need to be expanded in number as well as in the provision of more knowledge-intensive areas. Especially for women entrepreneurship a key success factor is to additionally overcome the dominant societal role model of women at the meta level. IV.3. Meta level findings and challenges The overall future orientation towards the promotion of women entrepreneurship at the micro, meso and macro level depends very much also on the societal development stage (meta level) and dominant role models as well as on the willingness to change certain traditional behaviour, stereotypes and patriarchal attitudes. According to the existing needs assessment studies there are still dominant social stereotypes existing in the Armenian sector with the belief that business development is mainly the responsibility of men. This is especially the case in rural areas in Armenia where the dominant breadwinner is the man within the family. This 12 See: BDS needs survey from Alanakyan. 11

attitude changes in the larger cities like e.g. Yerevan where stereotypes of behaviour are different and role models get more blurred. Still many women see themselves not in the role of an entrepreneur due to the lack of self-confidence. This is the reason why their businesses are dominantly in traditional businesses, where the role of women is accepted in the society. Key challenges for the promotion of women entrepreneurship at the meta level It will be necessary to change traditional role models in Armenia. There are certain ways to encourage the change of role models at the meta level. They are related to awareness creation but also especially through concrete actions at the meso, macro and micro level. It will be important to promote the access of women to entrepreneurship development and business skills as well as to promote knowledgeintensive female businesses and awareness creation through distributing successful female entrepreneur examples as new role models. V. Areas for systemic interventions to promote WE What is required for the future promotion of women entrepreneurship is a systemic approach that tackles the main challenges at the different levels in a synergetic way. The following bullet points point out main areas of interventions: 1. Alignment and coordination between the existing government organisations, donors and business organisations about common direction and fields of support (Macro-Meso-coordination): the promotion of women entrepreneurship depends very much on a clear commitment of the relevant stakeholders in the promotion of business development in Armenia. It will be important that the different projects and intervention strategies of these stakeholders are coordinated and that they agree on a common intervention strategy. This paper should provide a basis for joint action along the action plan areas 2. Provision of more differentiated Data through the support from the supporting organisations (Macro-Meso-synergies): One important area of the strategy is the identification of more differentiated data on the role of women in the local and national economy. This data collection on male and female roles in economic development should not be collected randomly. Rather it should start by looking at the existing SME promotion activities. The existing data from these projects should be complemented with additional data on the position of women in this respect. The supporting organisations like SME DNC as well as other SME organisations and donors are asked to participate in this focused data collection 3. Definition of female SMEs (Macro-meso level): At present there exists no agreed definition of how to define a female business. The existing practice to differentiate between male and female businesses based on the person who has registered the business is not reliable. At the same time, using the management of a business as reference point also does not seem to be really helpful. A 12

definition based on a consensus between the main stakeholders in the field of women promotion will be necessary. 4. Expansion of business services for male and female businesses and the promotion of a more inclusive approach (macro-meso level): the existing promotion activities should become more women-inclusive. This means that more emphasis has to been given to the stronger integration of female entrepreneurs into the running promotion activities of donor support programs, SME DNC, chamber and other business and support organisations 5. Awareness creation and documentation of success stories from successful existing female entrepreneurs and start-ups (Meta-Meso level): Changing role models and stereotypes in a society will only be successful when other role models than the traditional ones are becoming known. Success stories and stories provide a good opportunity to demonstrate new role models for women who would like to become an entrepreneur. The documentation of such cases from successful male and female entrepreneurs can provide a vision as well as a motivating perspective for the younger generation to also move into selfemployment. 6. Using the value chain-, cluster and LED approach to identify specific support requirements of female entrepreneurs and employees (micro-meso level): SME DNC as well as other organisations are using the value chain-, local economic development (LED) and cluster approach to better support local businesses (see also SME strategy, chapter 6 on community and regional dimension). Analysing the position of female entrepreneurs in value chains and local economies and identifying their constraints very specifically in regard to the access to specific services and knowledge resources will be an important opportunity to identify entrance points. With an LED or cluster perspective it should especially be analysed what the local supporting institutions as well as the local policy representatives provide for female (potential) entrepreneurs to promote startups especially in areas where women have a specific potential to be successful as well as where they (not) integrate and provide specific support to existing female entrepreneurs. According to the results of the analysis respective actions need to be taken. 7. Integration of female entrepreneurs into informal and formal business networks (Micro-meso level): Women as entrepreneurs have a weak economic and political voice in Armenia at present. It will be important to promote informal and formal business networks between female entrepreneurs as well as strengthening the access of women into existing business associations or business networks. It requires not only a change of behaviour within the networks but also an engagement of female entrepreneurs in these organisational structures. 13

VI. Design of impact indicators and an action plan for the promotion of Women Entrepreneurship in Armenia The objective of the WES is to improve the number s of female businesses in Armenia. This will only be possible if, first, the different stakeholders active and responsible for the promotion of Women entrepreneurship follow an aligned and systemic support approach. Second, concrete actions have to been implemented according to the findings mentioned above. The clarification of actions and the coordination in the implementation of focus areas will be one key success factor. The following sub-chapter will provide impact indicators based on the 7 intervention areas mentioned in the pervious chapter. VI. Impact indicators along the findings The general indicators will provide the basis for the design of the action plans and should thus tackle the main issues mentioned above at the different levels. Adding measureable indicators should be done by the coordination committee The following main indicators have to be seen as a first guideline for further discussion: Alignment and coordination between main stakeholders 1. Until the beginning of 2014 a coordination committee with main stakeholders like donors and supporting organisations for the promotion of the WES has been initiated and is active in the implementation of the action plan Provision of more differentiated Data 2. Main relevant sectors and value chains with a strong women participation as female entrepreneurs and employees are identified. 3. Potential innovative business opportunities for female businesses with higher and lower education are identified. Potential start-ups are promoted by the running start-up programs for women in Armenia. 4. In the upcoming years the economic information about and constraints of SMEs has to been differentiated between female and male businesses. An annual research survey provides an overview about trends and concrete demands 5. The role of women in dominant production and service chains as employees or entrepreneur has been analysed and first actions for the improvement of their role have been started. 14

Definition for female SMEs 6. An official definition of women-owned enterprises is accepted between the main active supporting organizations in the coordination committee. Following a more inclusive approach to the access of BDS 7. Main current BDS providers will increase women into their service-, trainingand coaching activities 8. Apart of increasing the participation of women into existing BDS supply, main supporting organizations and BDS provider have increased specific service supply for innovative women and innovative products (e.g. in value added production or with higher educated female entrepreneurs) Awareness creation and the documentation of success stories 9. SME supporting institutions have developed many success stories of successful female entrepreneurs. Using the value chain-, cluster and LED approach to identify specific support requirements of female entrepreneurs and employees (micro-meso level): 10. In each year more value chains are analysed according to the role of female employees and employers and support suggestions are provided 11. Rural development-, LED and value chain programs running at present in Armenia have integrated into their analytical methodologies and promotion activities female entrepreneurs as a specific target group Integration of female entrepreneurs into business and information networks 12. SME projects will have integrated into their promotion of business networks also women. This can be demonstrated according to the increase of female network members within existing ones 13. Promotion of female coaching networks and mentorship programs to increase the access and network exchange of female businesses 15