The importance of SMEs to overall growth in an economy is well known. Although the exact definition of SMEs varies from country to country, they are generally much larger — both in terms of assets and number of employees — than microenterprises. SMEs are often lifelines for larger firms — including foreign firms — supplying them with raw materials, parts, and services. They are also more productive than microenterprises, driving employment and competition.

Starting and operating an SME requires not only entrepreneurial spirit and start-up capital (which many micro-entrepreneurs have), but also managerial and logistical expertise. In addition, in cumbersome business environments like Bangladesh, starting and operating an SME often requires a businessperson to be well connected to bureaucrats, or at least to networks who can access them. Female entrepreneurs in countries like Bangladesh frequently lack access to such expertise and networks, limiting their ability to become SME entrepreneurs. Moreover, expectations of women’s role in the family as wives, mothers, and homemakers may limit their ability to pursue economic opportunities outside of the home.

In order to understand these issues more deeply, The Asia Foundation has begun to closely examine the gender-disaggregated data of its Economic Governance Indices (EGI) in Bangladesh and other countries.

So far, the mostly firm-level and household-level demographic data suggest things are in line with what is expected. For example, it is no surprise that in Bangladesh, male SME entrepreneurs far outnumber female SME entrepreneurs.

According to the 2010 Bangladesh EGI data, only 69 of the 3,800 firms in the sample have at least one female owner. This means that less than 2 per cent of firm owners in the country are women. According to leading experts, most SMEs in the country are sole proprietorships or partnerships formed around family businesses.

Similarly, female SME ownership across districts is very uneven, with smaller districts like Barisal and Jessore having a higher proportion of female owners than large cities such as Dhaka, Chittagong, and Khulna. While we do not know for sure why this is the case, one hypothesis is that women face additional barriers to entrepreneurship in Bangladesh’s mega cities — such as the high price of land, weak urban governance, and limited access to effective networks.

Additionally, on average female-owned firms are younger than male-owned firms, at approximately 11 years and 13 years, respectively. Although the sample size for the female firms is small, the evidence suggests that this is a significant difference.

This reflects the relatively recent rise of female entrepreneurship in the country. According to the Strategic Foresight Group, an India based think tank, women’s formal labour force participation in Bangladesh has increased two per cent since 2005, adding over 1 million women to the labour force. This increase in labour force participation is due primarily to the absorption of women workers into traditionally male dominated fields such as frozen shrimp enterprises.

There has also been a rise in the number of women entrepreneurs. A recent study by the Bangladesh Women’s Chamber of Commerce finds that women entrepreneurs are more likely to hire other women, thereby increasing employment opportunities. Our own data bears this out. Not only do female entrepreneurs on average have one more employee than male entrepreneurs, but they are much are more likely to hire female employees. On average, female entrepreneurs have 1.3 female employees while men have only 0.12.

We discovered a significant difference in revenue generation. Average sales per worker at all male-owned firms in 2010 was more than 1 million Taka, while at firms with at least one female owner it was around 600,000 Taka. This finding corroborates evidence from a 2008 report by the Bangladesh Women’s Chamber of Commerce, which found that most women entrepreneurs only sell their products locally and that 43 per cent sell their products at lower prices than their male counterparts in order to compete effectively. This not only highlights the fact that women are not well connected to either markets or networks to advance their businesses, but that they tend to compete in a narrower range of commercial enterprises — such as handicrafts, dress making, and fish drying — which produce products that have less value-added, so it is difficult for them to sell beyond local markets.

Surprisingly, there are few demographic differences between men and women entrepreneurs. For example, women and men entrepreneurs are equally as likely to be married, have similar household sizes, and similar household income. The only significant and important difference is in the highest level of educational achievement attained: 83 per cent of women entrepreneurs have at least a junior secondary education or higher compared to 65 per cent of men entrepreneurs. This indicates that education may play a greater role in women’s entry into SME sector than for men.

While these findings are preliminary, they are useful in painting a picture of women’s SME entrepreneurship in Bangladesh. As we continue with our analysis, we hope to gain a deeper understanding, not just of the demographic and firm-level differences between men and women entrepreneurs, but also of how they each experience the business environment. This will help us better understand what policy makers and institutions can do to help improve and expand entrepreneurship and economic opportunities for women throughout Bangladesh.

Nina Merchant-Vega is The Asia Foundation’s assistant director for the Economic Reform and Development program. She is a co-author of the new book, Innovations in Strengthening Local Economic Governance in Asia.

An earlier version of this piece was published here by the Asia Foundation.