Bridging the Finance Gap for Women Entrepreneurs

18. Iran: Policy insights on how culture influences access to finance

Reza Ghiabi
École Polytechnique Fédérale de Lausanne

Nastaran Simarasl
California State Polytechnic University Pomona

Background

As of 2022, approximately 15% of Iranian women actively engaged in entrepreneurial activities (involvement in starting or running a new venture), compared to 25% of men (World Bank, 2022[1]). Despite significant challenges, women’s entrepreneurship has made notable strides in terms of both the number of businesses started by women as well as their performance. Women entrepreneurs are increasing active in emerging fields such as IT and fintech as well as in more established manufacturing and services industries with significant regional and international impact (Guttman, 2015[2]; Bahramitash and Esfahani, 2014[3]).

The entrepreneurial landscape for women is shaped by both historical precedents and contemporary developments. Historically, women played prominent roles in commerce, managing estates and contributing to economic activities. However, societal shifts, particularly following the 1979 Islamic Revolution, led to a perception of a woman’s role primarily revolving around familial duties (Simarasl et al., 2022[4]). Despite these challenges, the expansion of higher education opportunities and the proliferation of online platforms have empowered Iranian women to overcome some barriers and actively participate in shaping the entrepreneurial landscape (World Economic Forum, 2024[5]; Bouzari et al., 2021[6]).

Policy Issue: Social attitudes and the funding landscape for female entrepreneurs

In Iran, as in many emerging economies, the business and funding domains are predominantly shaped by the public and a male-dominated private sectors. This dual structure poses significant challenges for women entrepreneurs seeking to access funding to address their business needs (Vice Presidency for Women and Family Affairs, 2018[7]). Consequently, women find themselves constrained to mere survival rather than the opportunity to thrive in the entrepreneurial ecosystem.

Overall, there is a notable lack of financial resources for entrepreneurs in Iran. This scarcity of funding acts as a major barrier, disproportionately impacting women and preventing them from initiating and sustaining their businesses effectively (Sarfaraz and Faghih, 2011[8]). Moreover, lower self-confidence and fear of failure can discourage them from pursuing external financial resources (Fam, 2022[9]). In addition, women’s lack of access to collateral assets, high interest rates, and financial institutions’ low trust in women’s ability to repay their loans hamper women’s ability to secure external financial resources, limiting their options for funding their ventures (Sarfaraz and Faghih, 2011[8]; Simarasl et al., 2022[4]).

However, there is relatively little institutional support from non-governmental organisations (NGOs) and other support providers to address the specific needs of women-owned businesses in access to funding and resources (Simarasl et al., 2024[10]). According to the Global Gender Gap Index (2024), Iran ranks 143^rd among 146 countries in terms of gender equality indicators, reflecting the need for greater policy attention to address systemic barriers faced by women entrepreneurs (World Economic Forum, 2024[5]).

Moreover, there is little support infrastructure for entrepreneurship and a low presence of international investors. The limited availability of programmes aimed at fostering entrepreneurship among women contributes to a constrained entrepreneurial ecosystem, hindering the growth and success of women-owned businesses. Initiatives such as the Women Entrepreneurship Support Programmes (WESP) launched by the Ministry of Cooperatives, Labour and Social Welfare aim to provide training and support to women entrepreneurs, but more comprehensive efforts are needed to address the cultural, legal, financial, and societal challenges faced by women in accessing business funding in Iran.

Conclusions

Addressing the barriers women face to accessing business funding is essential for fostering a thriving entrepreneurial environment in Iran. Despite the challenges faced by women entrepreneurs, there is a growing recognition of the pivotal role women play in driving economic growth and innovation. As the country seeks to harness the potential of its female workforce, policy makers can do more to prioritise targeted interventions to support and empower women entrepreneurs. Potential avenues for policy development including fostering more collaboration among top women managers through the growth of relevant networks, providing support to aspiring women entrepreneurs in knowledge intensive sectors in universities and facilitating crowdfunding and micro-funding platforms.

References

[3] Bahramitash, R. and H. Esfahani (2014), “Gender and Entrepreneurship in Iran”, Middle East Critique, Vol. 23/3, pp. 293-312, https://doi.org/10.1080/19436149.2014.949935.

[6] Bouzari, P. et al. (2021), “Online Social Networks and Women’s Entrepreneurship: A Comparative Study between Iran and Hungary”, JWEE 3-4, pp. 61-75, https://doi.org/10.28934/jwee21.34.pp61-75.

[9] Fam, Z. (2022), “Iranian women entrepreneurs: Good, bad, ugly”, Journal of Entrepreneurship, Business and Economics, Vol. 10/2, pp. 63-85, https://scientificia.com/index.php/JEBE/article/download/207/197 (accessed on 30 September 2024).

[2] Guttman, A. (2015), “Set to take over tech: 70% of Iran’s science and engineering students are women”, Forbes, https://www.forbes.com/sites/amyguttman/2015/12/09/set-to-take-over-tech-70-of-irans-science-and-engineering-students-are-women/ (accessed on 30 September 2024).

[8] Sarfaraz, L. and N. Faghih (2011), “Women’s entrepreneurship in Iran: a GEM based-data evidence”, Journal of Global Entrepreneurship Research, Vol. 1/1, pp. 45-57.

[4] Simarasl, N. et al. (2022), “Constrained but not contained: How marginalized entrepreneurs overcome institutional bias and mobilize resources”, Strategic Entrepreneurship Journal, Vol. 16/4, pp. 853-888, https://doi.org/10.1002/sej.1438.

[10] Simarasl, N. et al. (2024), “Unveiled confidence: Exploring how institutional support enhances the entrepreneurial self-efficacy and performance of female entrepreneurs in constrained contexts”, European Management Journal, Vol. 42/1, pp. 33-45, https://doi.org/10.1016/j.emj.2022.07.003.

[7] Vice Presidency for Women and Family Affairs (2018), National report on women`s status in the Islamic Republic of Iran, https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/CSW/64/National-reviews/Iran.pdf (accessed on 30 September 2024).

[1] World Bank (2022), Population - Iran, Islamic Rep, https://data.worldbank.org/indicator/SP.POP.TOTL?locations=IR (accessed on 30 September 2024).

[5] World Economic Forum (2024), Global gender gap report 2024: Insight report, https://www3.weforum.org/docs/WEF_GGGR_2024.pdf (accessed on 30 September 2024).