Business environment constraints for micro and small enterprises in El Salvador

Abstract

Because of the contribution of small businesses to women’s incomes, support to micro and small entrepreneurs is an important means of alleviating poverty in Central America. However, although research has shown that the business environment in general is more punishing to small businesses, it remains unclear whether it is particularly harsh for women entrepreneurs. We draw from the existing literature on women-owned businesses to describe the potential challenges female entrepreneurs face and explore whether these predictions are borne out in the 2009 and 2011 El Salvador Municipal Competitiveness Index survey by comparing characteristics and perceptions between female and male entrepreneurs. We find that female business owners do not report significantly different challenges in the general business climate than do male entrepreneurs, regarding such challenges as licensing and regulatory procedures, government inspection, corruption, or crime. The analysis also shows that there is convergence in general characteristics of male- and female-owned enterprises in El Salvador, but in spite of this narrowing of differences, sex-based differences persist. These findings support the need for targeted and tailored support to women entrepreneurs to address specific business problems rather than general investment support or business environment reform specific to the needs of female entrepreneurs. Based on this analysis, we outline implications for policies and programs to support female micro-entrepreneurs in El Salvador and in other contexts.