Do Traditional Institutions Constrain Female Entrepreneurship? A Field Experiment on Business Training in India

TLDR: In this paper, a recent empirical study finds low returns to capital in female-run micro-enterprises and the primary barrier to female entrepreneurial success is limited demand for rather than supply of credit, with poor women lacking high-return means of expanding their businesses.

Abstract: What constrains the entrepreneurial choices of poor women? Do traditional institutions pose unique barriers to business growth and profitability for female-run enterprises? The explosion of microfinance programs, which typically target poor female entrepreneurs, has drawn attention to these questions. Indeed, one view is that inadequate access to credit prevents women from undertaking high-return business activities. However, one recent empirical study finds low returns to capital in female-run micro-enterprises (Suresh De Mel, David McKenzie and Christopher Woodruff 2008). Thus, another view is that the primary barrier to female entrepreneurial success is limited demand for rather than supply of credit, with poor women lacking high-return means of expanding their businesses. For instance, due to gender differences in education or business networks, women might be relatively uninformed about investment opportunities and untrained in basic cost-benefit analysis (Dean S. Karlan and Martin Valdivia 2008). A second possibility is that norms governing women’s roles in society limit women’s perceptions about what is achievable in the workplace. Even differences