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Effects of gender on the performance of micro and small enterprises in

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Article in Development Southern Africa · September 2008

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Gender and Performance of Micro and Small Enterprises in
Malawi∗
Ephraim W. Chirwa†
University of Malawi, Chancellor College

Wadonda Consult Working Paper WC/01/04, March 2004

Abstract
The growing importance of micro and small enterprises in growth, poverty reduction and livelihood
strategies in developing economies where paid job opportunities are limited cannot be understated.
One interesting development is that women are increasingly venturing into ownership of micro and
small enterprises either on their own or in partnership with male entrepreneurs. This study assesses
the performance of enterprises owned by females relative to those owned by males using national
survey data in Malawi. The results show that the relationship between gender and business
performance is complex. While there are no significant differences in profit margins, female-owned
enterprises tend to grow rapidly in terms of employment than male-owned enterprises but female-
owned enterprises are likely to reveal decreases or no change in the growth of sales than male-owned
enterprises. Gender based results also show that while there are common factors that affect the
performance of female-owned and male-owned enterprises, there are also differential effects
particularly in the revealed growth in sales in which education is a critical factor for the success of
female-owned enterprises.

1. Introduction

The role of women in economic development cannot be understated. Jiggins (1989)

notes that about 30 percent of rural households in the world are headed by women, and
women contribute about 80 percent of agricultural labour, produce almost 60 percent of
the food that is consumed by rural households and generate more than a third of all
household incomes mainly through small scale agro-industry, trading, craft work and
casual labour. In Malawi, about 59 percent of female proprietors indicated that their
enterprises contributed 50 percent or more towards household incomes (Daniels and
Ngwira, 1993). However, concern about women’s participation in the process of
economic development is relatively new. As Lele (1986) points out the frequently
debated questions are whether women have adequate opportunities to participate in the
productive processes or they are beasts of burden who are the primary victims of
exploitation. There have been several studies on the role of women in economic

∗
This study was funded by the Organisation of Social Science Research in East and Southern Africa
(OSSREA), P.O. Box 31971, Addis Ababa, Ethiopia, Tel: 251-1-551163, Fax: 251-1-551399, Email:
[email protected]) under the15th OSSREA Gender Issues Research Competition Grant for which I
acknowledge the financial support. I also acknowledge the research assistance provided by Grace
Kumchulesi and Naomi Mathenge in data analysis. However, I am solely responsible for all the remaining
errors.
† Associate Professor of Economics, Department of Economics, University of Malawi, Chancellor College,

PO Box 280, Zomba. Email: [email protected].

1
development although this has tended to focus on the agricultural sector.
The micro and small enterprises (MSEs) sector plays an important role in Malawi.1 In
1992 it was estimated that there were 587,283 MSEs generating about 1.07 million self
and paid employment opportunities compared to 557,848 MSEs generating 1.01 million
employment opportunities in 2000 (ECI & NSO, 2000). However, the role of women in
micro and small enterprises (MSEs) has significantly improved over time in Malawi. At
independence, the economy was dominated by the Europeans and Asians specialising in
manufacturing and commerce, respectively. In the post-independence era a lot of policy
changes have occurred and have contributed to the development of local and women
entrepreneurship. Since 1981 Malawi has been moving towards the market economy
through the adoption of World Bank/International Monetary Fund structural adjustment
programs. In a study of small and agro-business enterprises in 1987, only 7 percent of
the sampled enterprise were owned and operated by women (Malawi/USAID, 1987).
However, the increasing importance of women in business enterprises was revealed in
later studies. In the 1992 survey of micro, small and medium scale enterprises about
45.5 percent of proprietors in Malawi were women (Daniels and Ngwira, 1993). A recent
GEMINI study further reveals that 34 percent of MSEs were owned by women, 35 percent
by men and 30 percent by married couples (ECI & NSO, 2000). Due to its potential in
povertry reduction, the MSEs sector is receiving increased focus in development policies
as stipulated in the Malawi Poverty Reduction Strategy Paper, in which it is singled out as
one of the sectors that has the potential for achieving pro-poor growth in which women
are to play a significant role (GOM, 2002).
However, the relative performance of micro and small enterprises operated by women
and men has not been studied in Malawi. This study attempts to fill this gap through a
quantitative analysis of the determinants of performance of non-farm micro and small
enterprises by gender. The specific objectives of the study are:
a) to analyse the effects of gender on the performance of micro and small scale
enterprises;
b) to analyse the socio-economic determinants of the performance of micro and

1 The official definition of micro and small enterprises (MSEs) is based on employment and annual
turnover (GOM, 1999). Micro enterprises have employment up to 4 persons and turnover up to MK0.120
million while small enterprises have employment of between 6 and 20 persons and a turnover of between
MK0.120 million and MK4 million. Medium enterprises have employment of between 21 – 100 employees
and a turnover of greater than MK4 million up to MK10 million. The data used in this study defines MSEs
as those businesses that employ 50 or less employees including working owners (ECI & NSO, 2000).

2
 small scale enterprises operated by women relative to those operated by men.

2. Gender and Business Performance: Literature Review

Traditionally, the reproductive role of women has been widely emphasised and women
were not thought to be breadwinners. The marginalization of women in economic
activities is well documented. Moser (1989) argues that women perform three roles in
society: reproductive, productive and community management roles. However, for a long
time only the reproductive role has been emphasised for women as home makers
compared to the productive role which has been dominated by men. More recently, it has
been recognised that women in rural areas are very much engaged in the subsistence
economy producing much of the household food requirements. With the growing
population and pressure on land resources the subsistence economy does not suffice to
produce household requirements and this has led to changes in the division of labour
between men and women. Women are becoming actively involved in other branches of
the economy such as industry and commerce in order to generate incomes to support
their households.
There are two main approaches that promote the productive roles of women in an
economy: the women in development (WID) and the gender in development (GAD)
approaches. The WID approach recognises that women are active participants in the
development process who through both their productive and reproductive roles provide a
critical but often unacknowledged contribution to economic development and growth.
Moser (1993) notes that despite the change in the WID approach from one of equity to
one of efficiency, the underlying rationale is that any development process would
proceed better if women were fully incorporated in the process, and therefore focuses on
women in isolation, promoting measures such as access to credit and employment as a
way of integrating women in the development process.
GAD provides an alternative approach and it maintains that women should not be
treated in isolation of men, but within a context of the social relationship between men
and women (gender) in which women have been systematically subordinated. The GAD
approach posits that the focus of women in isolation ignores the real problem - their
subordination to men. It therefore focuses on gender relations when designing measures
to help women in the development process. The GAD approach endeavours to remove
obstacles that impinge on women’s accessibility to productive resources such as credit

3
and employment opportunities (Moser, 1993).
There are several different strands of literature relevant to the thesis of how gender
affects participation in entrepreneurship activities and economic development. The
argument which emerges in the literature is that women have been marginalized in
society and motherhood has been assumed their important role (Moser, 1989). This
marginalization has been in the form of unequal opportunities in economic activities and
inequalities in access to the productive resources. Jiggins (1989) and Joekes (1999)
argue that despite women’s contribution to household food security and household
viability, patriarchal family and social structures deny women real property rights in land;
limit women’s access to and control over the proceeds of their own labour and constrain
their decision making role. The other gender difference in entrepreneurship and business
performance result from differences in human capital. The formal education systems
tend to have biases against women, and this leads to gender differences in human
capital leading to differences in managerial and technical skills.
Others argue that there is unfair division of labour in the household. Gender
differences in access to and control over resources also exacerbate inequities in
performance of micro and small enterprises (von Masson, 1999). Loscocco et al. (1999)
observe that women relative to men have less access to financial capital; and because of
past credit discrimination, women’s lower earning power and their traditional
dependence on men, women are likely to have fewer resources to invest in business
activities. The different socialisation, training and other experience of men and women
may therefore lead to different outcomes in business performance (Loscocco et al.,
1991). For example, women’s domestic responsibilities may lead to marginal success in
business because they spend disproportionate time on domestic chores than on
business activities.
In most African societies, like in any other developing country, women contribute
significantly to family labour in the subsistence economy with women doing most of the
cultivation, although there have been variations across countries (Boserup,1986). Chen
(1989) also asserts that in India women’s contribution to the production, processing, and
preservation of food is substantial as wage labourers, producers and managers. During
the colonial and post-independence periods, the participation of women in non-farm
activities was very negligible. But following variations in colonial and cultural activities,
women are actively shifting to non-farm business activities in other countries. For
instance, in West Africa women were active in trade of cash and food crops, crafts and

4
commerce while in East and Southern Africa women were confined most entirely to the
peasant agricultural sector (Gaidzanwa, 1993).
Several factors are associated with the shift of women from the peasant agricultural
sector to industry and service sectors in Africa. First, the growing population in Africa has
meant that the land resource which has dominantly been owned by males cannot
generate adequate incomes for the households. Secondly, Gaidzanwa (1993) argues
that changes in entrepreneurial patterns have occurred as a result of economic
recessions in Africa. For instance, the recessions of 1970s and 1980s have eroded the
living standards of the poorest as well as the middle class. Inflation and devaluations of
African currencies on world markets has had the effect of pushing the population
particularly women into intensified income-generating activities, both legal and illegal.
Thirdly, donor agencies and non-governmental organisations have created women’s
awareness in their contribution to economic development, and women have appreciated
the idea that they can be self-reliant if they engage in income-generating activities. In
some cases, modernisation has lead to the loosening of the traditional values which
confined women to household work.
With limited education and skills, and few formal employment opportunities, poor
women in developing countries often turn to self employment as a means of supporting
themselves and their families. Despite increased efforts in women’s participation in non-
farm activities; others argue that most women are involved in retail of petty commodities
such as knitwear, pots and foodstuffs (Gaidzanwa, 1993; Jiggins, 1989; Berger, 1989;
Daniels and Ngwira 1993; Nyanda et al., 1995). McCormick et al. (1997) find that
women entrepreneurs were over-represented in mini-manufacturing enterprises,
underrepresented in contract workshops and totally absent in mass production in the
garment industry but more balanced in custom tailoring. In addition, women tend to be
employed in small, home-based low-capitalised enterprises that supply goods and
commodities for low income consumer communities particularly in urban areas. The
proportion of women operating non-traditional businesses in manufacturing and service
sectors such as running consulting, legal, management services is small and these
businesses have been dominated by men.
With respect to performance in terms of profitability, growth and productivity there
exists very little empirical evidence on the success of women operated enterprises.
However, Berger (1989) argues that most of the petty trading activities operated by
women do not yield sufficient income to raise women out of poverty. Some empirical

5
studies tend to support this view. On average, women’s micro enterprises are found to
have lower sales revenue, fewer assets, smaller profit margins and lower likelihood of
survival than men’s enterprises (Mead and Liedholm, 1998; Daniels, 1999). Daniels
(1999) also finds that although women formed 43 percent of entrepreneurs the
percentage contributed to gross domestic product of the total MSE contribution was 30
percent for female proprietors, 50 percent for male proprietors and 20 percent for jointly
owned enterprises in Kenya. In addition, the percentage of women entrepreneurs making
earning above the minimum wage in Kenya was only 23 percent compared with 26
percent of male-owned entrepreneurs (Daniels, 1999).2 The relative poor performance of
women operated enterprises is attributed to many factors. These factors include
inaccessibility to credit from the formal financial system, lack of capital, poor technical
and managerial know-how, poor access to markets and raw material procurement
problems, unfavourable legal systems, competition from state enterprises, diversion of
business capital to men, poor government policies and inadequate institutional
framework (Berger, 1989; Jiggins, 1989; Buvinic 1993, Daniels and Ngwira, 1993). In
Malawi, Daniels and Ngwira (1993) and ECI and NSO (2000), find that the problems of
micro and small scale enterprises are not gender-specific.
Literature suggests four main categories of factors that affect the performance of
business enterprises with gender being one of the factors namely; human capital,
personal characteristics, family characteristics and business characteristics (Loscocco et
al., 1991; Daniels and Mead, 1998; McPherson, 1996). In terms of human capital,
literature suggests that the more skills and experience entrepreneurs bring into the
enterprise the more successful the business enterprise. Others contend that personal
characteristics embody entrepreneurial traits including the degree of risk-taking
behaviour and the motivation to achieve the highest levels. Loscocco et al. (1991) argue
that small business owners may also benefit from intangible success from family
members, although heavy family responsibilities may also have the negative effect of
detracting the entrepreneur from the business activity. Business characteristics also play
an important role in determining business performance. For example, the industry or the
product market in which the enterprise operates may influence business outcomes.
Others have argued that women are likely to operate in low risk and low technology
industries such as petty trading. The gender division of labour and the gender

2 In an earlier study, Daniels and Mead (1998), after adjusting for actual hours worked, find that 73
percent of female-owned enterprises and 51.7 percent of male-operated enterprises generated income

6
stereotypes tend to push women into low status and low income business activities (von
Masson, 1999). The other business characteristics that play an important role in
determining performance are size, age and location of the business. Size is associated
with economies of scale. McPherson (1996) argues that location of business (where
located at home, at a market or industrial or commercial area) has strong influence on
survival chances and growth of African MSEs. These various factors that influence
performance of enterprises may influence female-owned and male-owned enterprises
due to gender biases.
Several empirical studies use regression-based techniques to determine the relative
importance of gender and other socio-economic variables in explaining the performance
of micro and small enterprises. Loscocco et al. (1991) find evidence of gender
differences in the factors influencing business outcomes; and that female-owned
enterprises generate less profits than male-owned enterprises. Rosa et al. (1996) note
that the relationship between gender and small business performance is complex, but
found that gender appeared to be an important factor even after controlling for other
factors. McPherson (1996) explores determinants of employment growth among micro
and small enterprises and finds that female proprietors grow at lower rates than male-
owned enterprises and the coefficients were statistically significant in three of the five
countries. McPherson (1996) also finds that age, size and location of enterprises are
negatively related to firm growth. Daniels and Mead (1998) find that net profits per
person per months for female-owned enterprises were significantly lower than net profits
from male counterparts or mixed ownership enterprises. Their results also show that age,
paid workers and education were positively and significantly associated with profits while
unpaid workers and working proprietors were negatively associated with net profits.

below the minimum wage.

7
3. Data Sources and Model Specifications

3.1 Data Sources

Data used in this study comes from a national survey of micro and small enterprises in
Malawi conducted in 2000 (ECI and NSO, 2000). Data was collected using the Growth
and Equity through Micro Enterprises Investments and Institutions (GEMINI)
methodology.3 The survey covered enterprises with fewer than 50 employees including
working proprietors but excluded businesses with multiple branches even when any one
encountered branch qualifying on the employment criterion. The Malawi GEMINI
questionnaire collected information, inter alia, relating to entrepreneur characteristics
(age, gender, race, marital status, education, entrepreneurship training), enterprise
characteristics (type of ownership, type of industry or sector, age of business, initial and
current employment levels, sales and profits, qualitative measures of sales growth),
major constraints and problems, source of start-up capital, access to credit facilities,
major markets and location of business enterprise. Although the data also covers farm or
agricultural enterprises, this study uses only data for non-farm business enterprises. A
usable sample of 3,074 non-farm MSEs used in this study was generated from the
survey data. In terms of gender of ownership, 35.9 percent of the sample MSEs are
female-owned, 47.5 percent are male-owned and 16.6 percent have mixed-gender
ownership (15.9 percent being spouse-owned).

3.2 Model Specification

The study uses econometric techniques to analyse the effect of gender on business
performance and to analyse whether different factors influence the performance of
female-owned enterprises relative to male-owned enterprises.4 We use three
performance indicators: the profit margin, growth in employment and the qualitative
growth in sales. This will involve two econometric modelling techniques, ordinary least

3 For details of sample design and sampling, see ECI & NSO (2000).
4 ECI & NSO (2000) analyses the data mainly using statistical methods, frequencies, cross-tabulation and
bivariate comparisons, without testing for the statistical significance of the resulting differences. One
problem with the statistical approach is that it assumes away the complexity of the relationships between
the variables.

8
squares and multinomial logit regression methods. For each performance indicator, three
models are estimated: a general model with the gender variable, a model for female-
owned enterprises only and a model for male-owned enterprises only. The regression
model based on the ordinary least square method is specified as follows:

Pi = β 0 + β 1 SEX + αECH + φBCH + γCVA + µ i (1)

where for enterprise Pi is the performance indicator (profitability and employment

growth) for enterprise i, SEX is the gender of the owner of the enterprise; ECH is a vector
of entrepreneur characteristics including age, education, entrepreneurial skills training
and business experience; BCH is a vector of business characteristics including
diversification, location of the business, main markets for the products and sector; and
CVA is a vector of control variables such access to credit, membership to business
associations, stratum of the enterprise (urban, small town or rural) and hours the
business is open in the year; and µ i is the error term.
The growth in sales is measured qualitatively based on the revealed experiences of
the entrepreneurs on whether they had experienced increase, decrease or no change in
sales in the past five years. This relationship between growth of sales is modelled as a
multinomial choice model with three choices (1, 0, -1) representing (increase, no change,
decrease) and we explore the probability that gender of ownership and other factors are
likely slow down growth of enterprises, with those that experienced increase in sales as a
base category. The multinomial logit model is specified as follows:

QGRS i = β 0 + β 1 SEX + αECH + φBCH + λBPRO + γCVA + µ i (2)

where QGRS i is the qualitative growth in sales (increase, decrease or no change);

BPROB is the vector of business problems experienced by entrepreneurs; all the other
variables are as defined in equation (1).

9
3.3 Description and Measurement of Variables

Dependent Variables

Three dependent variables are used in the analysis: profit margin, employment growth
and qualitative sales growth. The first dependent variable, the profit margin, is the
annualised ratio of net profits to total sales. Since data on expenses and sales were
collected with reference to ‘last week’, the method used to calculate annualised
expenses and sales assumed that the ratio of expenses last week to sales last week was
constant. For each month, information on high, average and low sales months with
corresponding average monthly sales values were obtained to compute annual sales and
the constant expenses-sales ratio was used to generate annual expenses.5 The second
dependent variable, employment growth, is calculated using the McPherson (1996)
method in which growth in employment is defined as the ratio of the difference in the
logarithms of the current employment and the initial employment to the age of business.6
The third dependent variable, the growth in sales, is a qualitative choice variable derived
from a question on the changes in sales in the past five years. The entrepreneurs that
experienced large and small increases in sales were coded 1, those that had
experienced no change in sales were coded 0, and those that experienced large or small
decrease in sales were coded -1. However, one limitation about this measure of growth is
that the question largely captured nominal sales as no particular emphasis was placed
on real sales.

Independent Variables

The first category of independent variables relate to the gender of proprietors. The
gender of the owner of the enterprise is the central variable in our models. Three dummy
variables are created representing female-owned, male-owned and mixed-owned
enterprises. Various theories of gender whether based on marginalization, unequal
access to physical and human capital and socialisation postulate that female-owned

5 See ECI & NSO (2000) for details on the method used to calculate sales and profits.
6 Employees in this study include working owners, paid workers, unpaid workers and trainees, full and
part-time workers.

10
enterprises are likely to perform worse than male-owned enterprises. The mixed gender
owned enterprises is the base category. We therefore expect female-owned enterprises
to perform much lower than male-owned enterprises using the three measures of the
performance. Regressions based on the sub-sample of female-owned and male-owned
enterprises tests whether there are gender differences in the factors that affect the
performance of enterprises by gender.
The second category of explanatory variables captures entrepreneur characteristics.
Five entrepreneur characteristics are included in the model including age, marital status,
education, business skills training and business experience. Age of entrepreneur is
measured in years. Marital status is represented by a dummy equal to 1 if the
entrepreneur is married. Loscocco et al. (1999) argue that family situations, such as
marital status, may have both positive and negative impact on the business success.
Education of the entrepreneurs, business skills training and business experience capture
the human capital elements embodied in entrepreneurship. Education is represented by
six dummies: no education (base category), some primary education, completed primary
education, completed junior secondary education, completed senior secondary and
completed higher education. Business skills training is represented by three dummies
including no business training (base category), informal business training (learning from
relatives and friends) and formal business skills training. The business experience of the
entrepreneur is capture by number of years of business and business experience
squared is included to capture the non-linear relationship between performance and
experience. The human capital theory postulates that the more educated and more
experienced individuals are the higher the degree of success in economic activities and
we expect positive relationship between human capital variables and business
performance.
The third category of factors that may affect performance relates to business
characteristics. Literature also suggests the importance of business characteristics in
determining the performance of MSEs. We include number of businesses operated by
the entrepreneur as a measure of diversification, the location of the MSE, the major
market MSEs’ products and the industry sector in which the enterprises operate in
regression for all the three performance indicators. The number of businesses operated
may have both positive and negative effects on performance. On one hand diversification
may be used to pool the risk and this may lead to improved performance; but on the
other hand the allocation of labour by the entrepreneur may lead to crisis management

11
that may negatively affect the performance. Five location dummies are included in the
model: home or near home as base category, traditional market place, mobile market,
roadside or path, and commercial or industrial area. McPherson (1996) find evidence
that MSEs located in commercial areas grow more rapidly than home-based industries, a
result attributed to access to high income customers. MSEs sell their products either to
direct consumers or other small, medium and large enterprises and institutional
organisation. Institutional buyers may provide a reliable market and more contractual
binding orders that may be used as a platform for growth. We construct two dummies
representing the institutional market as base category and the consumer market.
The fourth category of independent variables is with respect to business problems
faced by entrepreneurs in the operation of their businesses. Mead (1994) notes that
MSEs face different problems at start-up, survival and growth stages with problems of
access to working capital and markets being particularly important at start-up phase and
problems of access to raw materials and machines emerging as growth constraints.
Gender theories also contend that female entrepreneurs experience different constraints
in business activities compared to male entrepreneurs; hence we expect differential
impact of business problems by gender of ownership. The impact of business problems
on the expansion of business activities is captured by the inclusion of the nature of
problems in the multinomial logit model of qualitative changes in sales. Six dummy
variables are included representing enterprises reporting no major problem as the base
category, finance problems, competition problems, marketing problems, input or supplies
problems and other business problems.
Finally, several control variables are included in all the three models and include
access to credit, membership to a business association, the stratum in which the MSE
operates and the number of hours the business operates in a year. Access to credit is
captured by a dummy variable on whether credit was obtained to finance the activities of
the business. Membership to a business association represents social capital and the
importance of networks in business activities and we expect enterprises in a network to
perform better than those that work independently. The stratum in which the enterprise
operates is represented by three dummy variables: rural MSEs (base category), urban
MSEs and small town MSEs. We expect urban MSEs to perform better than small town
MSEs which we expect to perform better than rural MSEs due to the high business and
large market in the urban areas. We also include the number of hours that the business
opens in a year in order to control for variations in working hours of the enterprises.

12
 Table 1 presents the descriptive statistics of the variables that we use in the
regression models. The average profit margin is 56.8 percent and female-owned
enterprises generate more profits (57.7 percent) than male-owned enterprises (56.6
percent) while mixed-gender owned enterprises generate the lowest profits (55.6
percent) although these differences are marginal. Similarly, female-owned enterprises
tend to grow faster in terms of employment (11.6 percent per year) than male-owned
enterprises (6.5 percent per year) and mixed-gender owned enterprises (6.9 percent per
year).

Table 1 Descriptive Statistics of Variables in the Model*

All MSEs Gender of Owners
Variables Female Male Mixed
Dependent Variables
Profit margin (%) 56.813 57.738 56.572 55.593
[25.96] [23.88] [27.49] [25.67]
Employment growth 0.084 0.116 0.065 0.069
[0.44] [0.63] [0.30] [0.20]
Sales growth (1=increase, 2=decrease,3=no change) 1.700 1.745 1.700 1.599

Independent Variables
Gender
Female-owned (1, 0) 0.359 - - -
Male-owned (1, 0) 0.475 - - -
Mixed-owned (1, 0) 0.166 - - -
Entrepreneur Characteristics
Age in years 33.046 34.027 31.803 34.483
[11.62] [11.25] [11.77] [11.58]
Married (1, 0) 0.764 0.652 0.777 0.972
Some primary education (1, 0) 0.460 0.438 0.489 0.422
Completed primary education (1, 0) 0.236 0.218 0.253 0.230
Completed junior secondary education (1, 0) 0.112 0.109 0.108 0.130
Completed senior secondary education (1, 0) 0.069 0.058 0.071 0.084
Higher education (1, 0) 0.022 0.024 0.018 0.031
Informal business skills training (1, 0) 0.135 0.079 0.185 0.114
Formal business skills training (1, 0) 0.142 0.084 0.164 0.200
Business experience (years) 6.342 5.236 7.228 6.207
[7.66] [6.69] [8.38] [7.15]
Business experience squared 98.833 72.061 122.385 89.520
[269.7] [212.3] [316.2] [227.3]
Business Characteristics
Ownership of multiple MSEs (1, 0) 0.138 0.171 0.084 0.222
Traditional market place (1, 0) 0.140 0.081 0.162 0.202
Mobile market (1, 0) 0.073 0.050 0.098 0.049
Roadside/path market (1, 0) 0.268 0.188 0.352 0.200
Commercial/industrial (1, 0) 0.119 0.063 0.155 0.138
Consumer market (1, 0) 0.984 0.992 0.982 0.974
Mfg: food processing (1, 0) 0.079 0.136 0.039 0.073
Mfg: beer brewing/spirit distilling (1, 0) 0.066 0.140 0.002 0.086
Mfg: textiles and leather products (1, 0) 0.071 0.043 0.102 0.041
Mfg: wood and pottery products (1, 0) 0.046 0.021 0.072 0.024
Mfg: other manufactures (1, 0) 0.024 0.010 0.038 0.016
Retail: fish and forest-based products (1, 0) 0.071 0.069 0.066 0.088
Retail: food, beverages and tobacco (1, 0) 0.092 0.134 0.075 0.049

13
 Retail: garments and footwear (1, 0) 0.079 0.024 0.130 0.055
Retail: general merchandise/grocery (1, 0) 0.231 0.149 0.264 0.314
Bars, restaurants and hotels (1, 0) 0.039 0.034 0.023 0.094
Services (1, 0) 0.076 0.034 0.116 0.049
Business Problems
Finance (1, 0) 0.282 0.269 0.281 0.314
Competition (1, 0) 0.080 0.102 0.064 0.077
Marketing (1, 0) 0.197 0.175 0.208 0.214
Inputs/supplies (1, 0) 0.245 0.276 0.234 0.208
Other problems (1, 0) 0.152 0.120 0.179 0.141
Control Variables
Credit access (1, 0) 0.105 0.149 0.077 0.094
Business association (1, 0) 0.029 0.028 0.027 0.037
Urban (1, 0) 0.568 0.572 0.616 0.424
Small town (1, 0) 0.225 0.193 0.211 0.332
Hours business is open 246.74 237.55 249.20 259.70
[111.1] [118.2] [91.74] [140.9]
Number of Enterprises 3074 1104 1460 509
Note: * Figures in parentheses represents dummy variables equal to 1 for the reference category,
otherwise equal to zero and the means are proportions for the reference category. Figures in
brackets are standard deviations for continuous variables.

There are gender differences in entrepreneur characteristics, business characteristics,

business problems and other variables. For instance, most female entrepreneurs lack
business skills training (informal and formal) and have less business experience than
male entrepreneurs while differences in education are marginal. The descriptive
statistics also show that a higher proportion of female entrepreneurs (17.1 percent) own
more than one enterprise compared with only 8.4 percent of male entrepreneurs. In
terms of location of business, female-owned MSEs are home-based than male owned
MSEs that tend to locate in high demand environments. Female entrepreneurs also tend
to operate more in food processing, beer brewing, retail of food and beverages and in
bars and restaurants than their male counterparts. For instance, 13.6 percent of female
entrepreneurs are in food processing industry compared with only 3.9 percent of male
entrepreneurs; while 13.0 percent of male entrepreneurs operate in retail of garments
and footwear compared to only 2.4 percent of female entrepreneurs.
There are also gender differences in the nature of business problems experienced by
MSEs, with a higher proportion of female entrepreneurs experiencing competition
problems and input/supplies problems than male entrepreneurs. Loscocco et al. (1991)
note that the concentration of women in highly competitive low-growth industries
explains their relative lack of success in MSEs. Gender biases are also revealed in
access to credit with 14.9 percent of female entrepreneurs compared to only 7.7 percent
of male entrepreneurs having accessed credit to support their business operations. The
reason for this positive bias in access to credit is that most micro finance institutions that

14
operate in urban, peri-urban and rural areas tend to lend to women.

4. Empirical Results

Table 2 presents ordinary least squares estimates of factors that influence profit margins
and growth in employment for all MSEs in the sample. With respect to profitability, the
gender of ownership is not statistically significant although male-owned enterprises tend
to perform better than female-owned enterprises. The only entrepreneur characteristic
statistically significant at the 1 percent level that affects profitability is education.
Although the coefficients of the education dummies are positive as expected, profitability
is statistically significantly higher for entrepreneurs with higher education (7.9 percent
above those without education) followed by those that completed junior secondary
education (4.1 percent above those with no education). Among the business
characteristics, operation of multiple enterprises, locations of the business and industry
in which the MSEs operate have significant influence on profitability. The coefficient of
the ownership of multiple enterprises is negative and statistically significant at the 10
percent level. The negative relationship reflects the inefficiency in time allocation among
the various enterprises that may lead to managerial inefficiencies.

15
Table 2 Ordinary Least Squares Estimates on Determinants of Profit Margins and
Employment Growth: All MSEs
Profit Margin Employment Growth
Variables coef. t-stat coef. t-stat
Gender
Female-owned 1.1678 0.86 0.0471 2.04**
Male-owned 2.2285 1.64 0.0157 1.15
Entrepreneur Characteristics
Age in years 0.0515 1.06 0.0007 0.51
Married 0.3996 0.38 0.0143 0.76
Some primary education 1.3610 0.88 -0.0021 -0.08
Completed primary education 1.5610 0.93 0.0075 0.28
Completed junior secondary education 4.0617 2.14** 0.0033 0.10
Completed senior secondary education 1.7602 0.75 0.0670 1.34
Higher education 7.9491 2.19** 0.0296 0.62
Informal business skills training 2.4987 1.64 -0.0020 -0.12
Formal business skills training 1.9205 1.31 -0.0297 -1.62
Business experience -0.1797 -1.22 -0.0149 -4.69*
Business experience squared -0.0005 -0.12 0.0003 4.63*
Business Characteristics
Ownership of multiple MSEs -2.3826 -1.79† 0.0149 0.52
Traditional market place 3.1906 2.02** -0.0053 -0.22
Mobile market 0.5808 0.30 -0.0694 -3.31*
Roadside/path market 4.4351 3.61* -0.0068 -0.23
Commercial/industrial -0.1994 -0.12 -0.0115 -0.42
Consumer market -2.4828 -0.66 0.0144 0.50
Mfg: food processing -0.3013 -0.18 0.0494 1.99†
Mfg: beer brewing/spirit distilling -0.4350 -0.22 -0.0138 -0.65
Mfg: textiles and leather products -18.188 -8.08* 0.0183 0.79
Mfg: wood and pottery products -23.777 -8.77* 0.0658 1.66†
Mfg: other manufactures -16.767 -4.62* 0.0081 0.32
Retail: fish and forest-based products -1.1681 -0.57 0.1045 1.38
Retail: food, beverages and tobacco 4.8415 3.10* 0.0419 0.94
Retail: garments and footwear 6.6680 3.58* 0.0432 1.47
Retail: general merchandise/grocery 1.8951 1.29 0.0262 1.31
Bars, restaurants and hotels -17.099 -5.07* 0.0548 1.13
Services -24.271 -10.17* 0.0574 1.79†
Control Variables
Credit access 1.1753 0.82 0.1118 2.31**
Business association 4.2701 1.46 0.0193 0.52
Urban 7.5394 5.51* 0.0056 0.15
Small town 5.1327 3.37* 0.0429 1.49
Hours business is open -0.0019 -0.36 0.0001 0.70
Constant 52.070 10.76* 0.0051 0.06
R-squared 0.187 0.033
F-statistic 18.07 3.20
Prob > F 0.00 0.00
N 3074 3074
Notes: The t-statistics are based heteroskedastic-consistent standard errors.
* Statistically significant at the 1 percent level.
** Statistically significant at the 5 percent level.
† Statistically significant at the 10 percent level.

MSEs that operate in a traditional market place and by the road side or foot path tend
to generate more profits that home-based MSEs with the coefficients being statistically

16
significant at the 1 percent and the 5 percent levels, respectively. The reasons for the
importance of these locations is that they are places of high demand and the transaction
costs (such as transportation) are minimized compared to mobile markets or commercial
areas. Profitability also tend to be statistically significantly (at the 1 percent level) higher
for MSEs operating in industrial sectors such as retail of food and beverages and retail of
garments and footwear while profitability is lower in the manufacture of textiles and
leather products, wood and pottery products and other manufactured products, bars and
restaurants and services. There is evidence that MSEs that are located in high income
strata (urban and small towns) generate more profits than those in rural areas, and the
coefficients are statistically significant at the 1 percent level. The profit margin is 7.5
percent in urban areas and 5.1 percent in small towns higher than the profitability
generated by MSEs in rural enterprises.
With respect to growth in employment, we find evidence that after controlling for other
factors that influence growth female-owned MSEs tend to grow at a faster rate than
male-owned MSEs. The coefficient of female-owned enterprises is statistically significant
at the 5 percent level and shows that female-owned MSEs grow at 4.7 percent faster
than MSEs with mixed gender. The coefficient of male-owned MSEs is positive and its
value below that of female-owned MSEs but it is statistically insignificant. These results
contrasts with the negative employment growth associated with female ownership in
other Southern African countries (McPherson, 1996). The only entrepreneur
characteristic that is statistically significant at the 1 percent level is business experience.
We find a curve linear (U-shaped) relationship between employment growth and business
experience. Thus, MSEs of new entrepreneurs tend to contract or have retarded growth
and growth reaches a minimum with 25 years of experience and thereafter a positive
relationship is observed as entrepreneurs gain more experience.
In terms of business characteristics only mobile market location, manufacturing in
food processing, manufacture of wood and pottery products and service industries are
statistically significant variables at least at the 10 percent level. MSEs that are mobile
experience reduction in growth in employment compared to home-based industries,
possibly reflecting the transaction costs of mobility and potential high waste of supplies.
MSEs in the manufacturing of food products and wood and pottery products and those
that operate in the service sector tend to grow at a faster rate (at least at 4.9 percent
higher) than the base category (retail of farm products). The important role that access to
credit can play in business expansion is revealed by the positive and statistically

17
significant relationship between credit and employment growth. The results show that
MSEs that had access to credit grow at 11.2 percent more than those that did not have
access to credit. Since a higher proportion of female-owned MSEs had access to credit, it
is not surprising that we find a significant relationship between female ownership of
MSEs and growth in employment.
Table 3 presents results from multinomial logit model on factors that retard sales
growth as qualitatively revealed by entrepreneurs. The base category is the revealed
increase in sales value. The value of the coefficient shows the magnitude of the effects
on the probability of an event occurring given the explanatory variable.7 The results show
that female-owned enterprises are likely to experience decrease in sales, although both
types of ownership are likely to experience no change in sales although the female-
owned MSEs perform worse than male-owned MSEs. In terms of entrepreneur
characteristics, the probability that sales will fall is positively associated with age of
entrepreneur – reflecting the lower productivity. Age of entrepreneur is not statistically
significant among MSEs that did not experience any change in sales. The level of
education plays an important role in determining revealed sales growth, particularly
higher levels of education from competing primary school to higher education reduce the
likelihood that the MSEs will experience decrease in sales or no growth in sales; and the
coefficients are particularly high for higher education.

7 The anti-log of the slope coefficient less one, all multiplied by 100 gives the percent change in the odds
(in favour of sales decrease or no change in sales) for a unit change in the explanatory variables.

18
Table 3 Multinomial Logit Estimates of Factors Retarding Sales Growth: All MSEs
Decrease in Sales No Change in Sales
Variables coefficient t-statistics coefficient t-statistics
Gender
Female-owned 0.2978 1.93† 0.3558 2.35**
Male-owned 0.2332 1.60 0.2679 1.85†
Entrepreneur Characteristics
Age in years 0.0133 2.73* 0.0053 1.07
Married 0.1881 1.57 -0.0607 -0.55
Some primary education -0.1674 -1.01 -0.2652 -1.64
Completed primary education -0.3929 -2.14** -0.3803 -2.15**
Completed junior secondary education -0.3712 -1.71† -0.3580 -1.75†
Completed senior secondary education -0.3888 -1.51 -0.5322 -2.17**
Higher education -0.7016 -1.82† -0.9431 -2.43**
Informal business skills training 0.2154 1.37 0.0578 0.38
Formal business skills training 0.2647 1.67† 0.2044 1.33
Business experience 0.0081 0.52 -0.0212 -1.35
Business experience squared 0.0003 0.69 0.0006 1.36
Business Characteristics
Ownership of multiple MSEs -0.4701 -3.07* -0.2528 -1.83†
Traditional market place -0.0272 -0.16 0.0122 0.07
Mobile market -0.4877 -2.29** 0.0563 0.29
Roadside/path market -0.0592 -0.45 0.0199 0.16
Commercial/industrial -0.2511 -1.44 -0.3607 -2.11**
Consumer market 0.1820 0.50 0.3452 0.83
Mfg: food processing 0.0060 0.03 -0.1759 -0.85
Mfg: beer brewing/spirit distilling 0.0736 0.30 0.0591 0.25
Mfg: textiles and leather products 0.0779 0.32 0.0452 0.20
Mfg: wood and pottery products -0.2257 -0.79 0.1058 0.42
Mfg: other manufactures -0.1376 -0.41 -0.0248 -0.08
Retail: fish and forest-based products 0.0110 0.05 0.0102 0.05
Retail: food, beverages and tobacco -0.2596 -1.21 -0.3879 -1.97**
Retail: garments and footwear 0.3297 1.52 -0.2780 -1.25
Retail: general merchandise/grocery 0.0647 0.37 -0.1601 -0.98
Bars, restaurants and hotels 0.1162 0.37 -0.3100 -1.08
Services -0.0976 -0.42 -0.3900 -1.71†
Business Problems
Finance 1.7838 4.37* 0.9534 3.89*
Competition 1.9158 4.46* 0.6585 2.31**
Marketing 2.0788 5.06* 0.8831 3.49*
Inputs/supplies 1.9138 4.69* 0.6328 2.53**
Other problems 1.5254 3.64* 0.6612 2.55**
Control Variables
Credit access 0.2029 1.39 0.0681 0.45
Business association 0.0707 0.25 0.0881 0.31
Urban 0.0667 0.46 0.1599 1.18
Small town -0.0530 -0.35 -0.0026 -0.02
Hours business is open -0.0022 -4.22* 0.00002 0.04
Constant -2.9222 -4.89* -1.8623 -3.30*
Wald Chi-squared 213.5
Prob > Chi-squared 0.00
Log Likelihood -2998.3
N 3074
Notes: The t-statistics are based heteroskedastic-consistent standard errors.
* Statistically significant at the 1 percent level.
** Statistically significant at the 5 percent level.
† Statistically significant at the 10 percent level.

In terms of business characteristics, the results show that ownership of multiple

enterprises may be good for sales growth, and the coefficient is statistically significant at

19
the 5 percent and the 10 percent levels among MSEs that experienced decrease and no
change in sales, respectively. Contrary to the evidence in the employment growth model,
operating a mobile MSE reduces the probability of experiencing decrease in sales while
locating in a commercial area reduces the likelihood of experiencing no change in sales.
The industrial sectors that have significant impact on sales growth are retail of food and
beverages and services. The coefficients of these variables are only statistically
significant among MSEs that experienced no change and reduce the likelihood of no
growth in sales. All the business problems increase the likelihood of a decrease or no
growth in sales and the coefficients are statistically significant at least at the 5 percent
level. With respect to decrease in sales marketing, competition and input/supplies
problems while with respect to no change in sales finance and marketing are the most
important business problems retarding growth. Finally, MSEs that open for more hours
per annum are unlikely to experience a decrease in sales and the coefficient is
statistically significant at the 1 percent level.
We turn to the results from gender-based regressions to test whether different factors
affect female- and male-owned MSEs differently. Table 4 presents gender-based results
on profit and employment growth performance using the ordinary least squares method.
In the profit margin models factors that are statistically significant in both female-owned
and male-owned MSEs are type of industry including manufacture of textiles and leather
products, manufacture of wood and wood products, bars and restaurants, and services;
and whether the MSEs are in the urban areas or small towns. All the industry sector
dummy variables that are significant are negatively associated with profit margins while
urbanisation has positive influence on profit margins. Completing junior secondary
education and higher education are positively associated with profitability and only
statistically significant in the female-owned MSE model. Ownership of multiple
enterprises is statistically significant at the 5 percent level in the female-owned MSE
model and has a negative influence on profitability. Business location factors are only
statistically significant among male-owned MSEs, in which locating at a traditional
market place and road side or paths tend to boost enterprise profitability. Female-owned
enterprises operating in the retail of food and beverages, retail of garments and
footwear, and retail of general merchandises generate more profits than the base
category of retail of farm produce. Profit margins among female-owned MSEs are highest
in retail of garments and footwear, 18.2 percent higher than the base category followed
by retail of food and beverages (7.3 percent) while male-owned enterprises in other

20
manufacturing tend to generate less profit than the base category.

Table 4 Ordinary Least Squares Estimates on Determinants of Profit Margins and

Employment Growth: Female- and Male-owned MSEs
Profit Margin Employment Growth
Variables Female-owned Male-owned Female-owned Male-owned
coef. t-stat coef. t-stat coef. t-stat coef. t-stat
Entrepreneur Characteristics
Age in years 0.186 2.6 -0.005 -0.1 0.004 1.3 -0.002 -1.5
Married 0.488 0.3 1.073 0.7 0.038 1.1 -0.005 -0.2
Some primary education 1.924 0.9 -0.036 0.0 0.044 1.1 -0.043 -0.8
Completed primary education 3.966 1.6 -1.054 -0.3 0.037 0.9 -0.029 -0.5
Completed junior secondary education 5.298 1.8† 2.188 0.6 0.057 1.3 -0.036 -0.6
Completed senior secondary 2.888 0.7 0.892 0.2 0.230 1.7† -0.028 -0.5
education 10.96 1.9† 6.813 1.2 0.119 1.3 -0.094 -1.5
Higher education 1.952 0.7 1.557 0.7 -0.029 -0.7 0.005 0.2
Informal business skills training 0.964 0.3 2.088 1.0 -0.101 -2.2** 0.002 0.1
Formal business skills training -0.022 -0.1 0.051 0.2 -0.026 -3.0* -0.008 -3.3*
Business experience -0.011 -1.7† -0.002 -0.4 0.001 2.8* 0.0002 2.8*
Business experience squared
Business Characteristics -3.815 -2.0** -2.261 -0.9 0.008 0.1 0.016 0.3
Ownership of multiple MSEs 1.758 0.6 5.682 2.2** -0.019 -0.4 0.006 0.2
Traditional market place -0.296 -0.1 1.418 0.5 -0.081 -2.0** -0.077 -2.9*
Mobile market 1.130 0.6 6.346 3.1* -0.001 0.0 -0.023 -1.0
Roadside/path market -1.106 -0.3 0.739 0.3 -0.027 -0.6 -0.015 -0.6
Commercial/industrial -3.979 -0.6 -0.091 0.0 0.046 0.7 -0.006 -0.2
Consumer market -0.581 -0.3 -1.962 -0.6 0.028 0.7 0.085 2.1**
Mfg: food processing -0.243 -0.1 -0.093 0.0 -0.005 -0.2 0.351 1.2
Mfg: beer brewing/spirit distilling -14.04 -3.4* -23.37 -7.2* -0.009 -0.2 0.013 0.4
Mfg: textiles and leather products -33.51 -7.1* -23.20 -6.5* 0.104 1.1 0.054 1.2
Mfg: wood and pottery products -9.000 -1.0 -20.16 -4.4* -0.111 -2.0** -0.004 -0.1
Mfg: other manufactures 0.029 0.0 -3.437 -1.0 0.217 1.2 0.009 0.2
Retail: fish and forest-based products 7.275 3.4* -0.056 0.0 0.031 0.4 0.053 1.0
Retail: food, beverages and tobacco 18.20 6.3* 1.302 0.5 0.127 0.8 0.016 0.6
Retail: garments and footwear 4.733 2.0** -3.442 -1.5 0.048 1.0 0.001 0.0
Retail: general merchandise/grocery -9.532 -1.8† -21.80 -3.3* 0.066 0.8 0.097 1.0
Bars, restaurants and hotels -21.06 -3.8* -28.54 -8.9* 0.029 0.5 0.055 1.3
Services
Control Variables 3.918 2.1** -0.195 -0.1 0.163 1.7† 0.080 1.6
Credit access 5.285 1.1 -1.400 -0.3 -0.037 -0.8 0.035 0.7
Business association 6.784 3.4* 11.27 4.7* -0.002 0.0 -0.009 -0.5
Urban 4.729 2.1** 5.462 2.1** 0.018 0.3 0.036 1.1
Small town -0.004 -0.5 0.005 0.6 0.000 0.4 0.0001 1.1
Hours business is open 49.27 6.7* 52.22 7.2* 1 -0.8 0.166 1.9†
Constant -0.118
R-squared 0.171 0.239 0.047 0.047
F-statistic 8.98 12.85 1.53 1.92
Prob > F 0.00 0.00 0.03 0.00
N 1104 1460 1104 1460
Notes: The t-statistics are based heteroskedastic-consistent standard errors.
* Statistically significant at the 1 percent level.
** Statistically significant at the 5 percent level.
† Statistically significant at the 10 percent level.

With respect to employment growth, common factors that significantly affect both
female-owned and male-owned MSEs include business experience and operating a
mobile MSE. The relationship between employment growth and business experience in
both cases is U-shaped, with experience initially leading to slow growth rates up to some
years and thereafter leading to higher growth rates. If the business location is a mobile

21
market, both female- and male-owned enterprises tend to have retarded growth rate in
employment. Operating in other manufacturing sector is negatively associated with
growth in female-owned MSEs but operating in the service sector is positively associated
with growth in employment. Operating in the manufacture of food products is associated
with high growth rates in employment among male-owned MSEs.
Table 5 presents gender-based results from multinomial logit models. The results
generally show differential effects of factors in explaining the revealed sales growth
among female-owned and male-owned MSEs. The common factors that affect the
probability of decrease in sales among female- and male-owned MSEs include
enterprises in retail of fish and forest products; all the business problems; and business
hours. Operating an MSEs in retail of fish and forest products sector increase the
probability of sales decline for female-owned enterprises but reduces the probability
among male-owned enterprises. All business problems increase the probability while
business hours decrease the probability of a revealed decrease in sales among both
female- and male-owned MSEs. In terms of no change in sales, the only common
determinant of performance is finance as a business problem, although its marginal
effect is higher among female-owned enterprises.
There are several factors with differential effects. The age of entrepreneur, marital
status of entrepreneur and business skills training increase the probability of sales
decrease only among male-owned MSEs. On the other hand, all the levels of education
reduce the probability of sales decrease only among female-owned MSEs, while
education is not statistically significant among male-owned MSEs. Business experience
has a U-shaped relationship with the probability of a sales decrease only among female-
owned enterprises. We also find that ownership of multiple enterprises and operating a
mobile MSEs reduces the probability of a sales decrease only among female-owned
MSEs. Many differentials also exist on factors that affect the probability of no change in
sales growth among female-owned and male-owned MSEs. Notably, education reduces
the probability of no change in sales among female-owned MSEs and has no effect
among male-owned MSEs. Locating a business in a commercial market, operating in the
textile and leather products manufacturing sector and service sector also reduces the
probability of no change in sales among female owned MSEs only.

Table 5 Multinomial Logit Estimates of Factors Retarding Sales Growth: Female- and
Male-owned MSEs
Female-owned MSEs Male-owned MSEs
Variables Decrease in No Change in Decrease in No Change in

22
 Sales Sales Sales Sales
coef. t-stat coef. t-stat coef. t-stat coef. t-stat
Entrepreneur Characteristics
Age in years 0.007 0.8 0.005 0.6 0.017 2.2** -0.0002 -0.03
Married -0.124 -0.7 -0.274 -1.7† 0.439 2.3** 0.220 1.3
Some primary education -0.730 -3.0* -0.572 -2.4** 0.468 1.5 -0.121 -0.4
Completed primary education -1.095 -3.8* -0.751 -2.7* 0.432 1.3 0.042 0.1
Completed junior secondary -1.128 -3.2* -1.074 -3.1* 0.452 1.2 0.063 0.2
education -0.863 -1.9† -0.671 -1.6† 0.412 1.0 -0.362 -0.9
Completed senior secondary -1.662 -2.3** -1.228 -2.1** 0.116 0.2 -0.631 -1.0
education -0.026 -0.1 0.382 1.2 0.378 1.8† 0.021 0.1
Higher education -0.017 -0.1 0.259 0.9 0.580 2.7* 0.341 1.5
Informal business skills training 0.058 1.7† -0.052 -1.7† 0.004 0.2 -0.009 -0.4
Formal business skills training -0.002 -1.9† 0.001 1.5 0.001 0.8 0.0003 0.5
Business experience
Business experience squared -0.501 -2.1** -0.354 -1.7† -0.259 -1.0 -0.246 -1.0
Business Characteristics -0.050 -0.2 -0.371 -1.1 0.226 0.9 0.283 1.1
Ownership of multiple MSEs -1.084 -2.3** 0.136 0.4 0.002 0.0 0.181 0.7
Traditional market place -0.004 0.0 -0.244 -1.2 0.145 0.7 0.357 1.8†
Mobile market -0.139 -0.4 -1.226 -2.8* -0.198 -0.8 0.172 0.7
Roadside/path market -1.010 -1.1 0.183 0.2 0.597 1.1 0.134 0.3
Commercial/industrial 0.276 1.0 -0.203 -0.8 0.013 0.0 0.043 0.1
Consumer market 0.002 0.0 -0.373 -1.2 0.893 0.7 0.897 0.8
Mfg: food processing 0.255 0.6 -0.779 -1.7† 0.149 0.4 0.197 0.6
Mfg: beer brewing/spirit distilling -0.040 -0.1 -0.137 -0.3 -0.260 -0.7 0.431 1.2
Mfg: textiles and leather products -0.034 0.0 0.627 0.8 0.050 0.1 0.232 0.5
Mfg: wood and pottery products 0.799 2.3** -0.114 -0.3 -0.750 -1.8† -0.229 -0.7
Mfg: other manufactures -0.122 -0.4 -0.422 -1.6 -0.397 -1.0 -0.209 -0.6
Retail: fish and forest-based products 0.687 1.4 -0.637 -1.0 0.404 1.3 -0.139 -0.4
Retail: food, beverages and tobacco 0.341 1.2 0.069 0.3 0.010 0.0 -0.278 -1.0
Retail: garments and footwear -0.136 -0.2 -0.410 -0.9 0.291 0.5 0.166 0.3
Retail: general merchandise/grocery -0.284 -0.5 -0.984 -1.8† 0.033 0.1 -0.042 -0.1
Bars, restaurants and hotels
Services 1.409 2.6* 1.276 3.6* 1.998 2.6* 0.839 2.1**
Business Problems 1.817 3.2* 1.012 2.5** 1.748 2.2** 0.250 0.5
Finance 1.985 3.6* 1.086 2.8* 2.136 2.8* 0.649 1.6
Competition 1.541 2.9* 0.942 2.6* 1.989 2.6* 0.242 0.6
Marketing 1.271 2.2** 1.033 2.6* 1.532 2.0** 0.471 1.2
Inputs/supplies
Other problems 0.248 1.1 -0.048 -0.2 0.074 0.3 0.281 1.2
Control Variables 0.029 0.1 0.296 0.6 -0.136 -0.3 0.008 0.0
Credit access 0.091 0.4 0.144 0.7 0.029 0.1 0.148 0.7
Business association 0.036 0.1 0.048 0.2 -0.297 -1.2 -0.171 -0.7
Urban -0.003 -3.2* 0.000 0.3 -0.002 -1.9† 0.000 0.2
Small town -0.344 -0.4 -0.920 -0.7 -4.481 -4.3 -1.871 -2.3**
Hours business is open
Constant
Wald Chi-squared 147.8 143.4
Prob > Chi-squared 0.00 0.00
Log Likelihood -1061 -1404
N 1104 1460
Notes: The t-statistics are based heteroskedastic-consistent standard errors.
* Statistically significant at the 1 percent level.
** Statistically significant at the 5 percent level.
† Statistically significant at the 10 percent level.

5. Conclusions

The development of micro and small enterprises is seen as one instrument in addressing
poverty problems in developing countries, and women are increasingly participating in

23
the ownership of MSEs in developing countries. In Malawi, 34 percent of MSEs are
owned by women compared to 35 percent owned by men and 31 percent owned by
mixed gender, implying that women are involved 65 percent of micro and small
enterprises. This study has analysed the differential performance of MSEs in terms of
profitability, employment growth and revealed qualitative growth in sales by gender of
entrepreneurs using data from a national survey. Using data for non-farm micro and
small enterprises several econometric models have been estimated; and to investigate
the differential effects of factors affecting business performance by gender the sample
was split into three gender categories: female-owned, male-owned and mixed gender
owned.
There is some evidence that the gender of the entrepreneur plays an important role in
the performance of micro and small enterprises in Malawi. Gender is important in two of
the three measure of performance used in this study. In terms of profitability
performance, we find no evidence of significant differences in the performance of
female-owned and male-owned MSEs. Statistically significant gender-based differences
in performance are evident in employment growth and revealed qualitative growth in
sales. In terms of employment growth, female-owned enterprises grow at a faster rate
than male-owned enterprises. This is partly due to the relative access to credit facilities
from microfinance institutions that mostly target women entrepreneurs and partly due to
the high marginal impact of education. In terms of revealed sales growth, the evidence
suggests that women entrepreneurs are likely to experience decrease or no change in
sales than male entrepreneurs partly due to differential impact of business problems.
In terms of gender-based differences in factors influencing performance, one
interesting result is that the impact of education on performance is more pronounced in
female-owned businesses than in male-owned businesses, although male entrepreneurs
are slightly better endowed in human capital than female entrepreneurs. Completion of
junior secondary education and higher education are positively related to profitability
among female-owned enterprises while none of the education variable is statistically
significant. Similarly, at least one education category (completion of senior secondary
education) is statistically significant among female entrepreneurs in employment growth
compared to none among male entrepreneurs. Education is also associated with
reduction in the probability of experiencing a decline in sales or no change in sales
among female entrepreneurs than among male entrepreneurs. We also find that access
to credit is more productive in female-owned enterprises. Female-owned enterprises that

24
have access to credit tend to perform better in terms of profitability and employment
growth than male-owned enterprises. This suggests that gender biases against womens’
access to capital and finance may impede the growth of MSEs, supporting the
proposition of the gender and development theorists. Credit in male-owned enterprises is
not used productively, and though not statistically significant reduces the profitability of
male-owned MSEs.
The others factors that lead to differential performance of female-owned and male-
owned MSEs are economic sectors within which the enterprises operate. Sectors that are
gender neutral and in which profit margins are lower include textile and leather
manufacturing; wood and pottery products manufacturing; bars, restaurants and hotels;
and services. However, female-owned enterprises achieve higher rates of profits than
male-owned enterprises in sectors such as retailing of food, beverages and tobacco;
retailing of garments and footwear and retailing of general merchandise. We also find no
significant differences in the extent to which business problems affect the gender-based
performance of MSEs. All the business problems retard the revealed growth in sales,
although these problems are more pronounced in the case of female-owned enterprises.
The most important problem that affect the probability of revealed decrease in sales for
both female-owned and male-owned enterprises relate to marketing, followed by
competition in female-owned enterprises and finance in male-owned enterprises. All the
five business problems increases the probability of no change in revealed growth in sales
for female-owned enterprises while only finance problems increases the probability of no
change in revealed sales growth in male-owned MSEs.
The results in this study point to several policy issues. First, interventions in the MSEs
sector may require gender specific interventions as different factors affect the
performance of female-owned and male-owned enterprises in different degrees.
Secondly, the relative importance of education in female-owned enterprises suggests the
need to increased human capital investments in women. Thirdly, increasing access to
credit facilities to female entrepreneurs is more productive than increasing access to
credit to male entrepreneurs. There is need therefore to promote microfinance
institutions that target financing of non-farm economic activities, with a deliberate bias
towards providing credit to women entrepreneurs.

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