4.0 Literature Review
4.1 The Role of Women Owned Businesses in Saudi Economy
The Kingdom of Saudi Arabia has embarked on an economic transformation program that seeks to transform Saudi Arabia’s resource-based economy into a knowledge-based economy. To accomplish this national objective, the country is leaning towards the development of a dynamic entrepreneurship sector, which is recognized worldwide as a key driver of economic growth and societal revitalization. Thus, the creation of new employment opportunities for Saudi Arabian nationals is a critical concern of the Saudi Arabian government. Government leaders believe that employment opportunities can be created in the private sector and Saudi Arabian women participate in this national economic goal.
Women entrepreneurs are found throughout the world. Today, the global impact of women entrepreneurs is well documented and analysed. According to a report by 2012 Global Entrepreneurship Monitor report, there are about 126 million women that have started or are running new businesses in 67 countries all over the world . This is on top of the 98 million women that are already running established business organizations. These women are estimated to provide employment to at least one more person to help run the business. These women entrepreneurs are seeing growth, with about 7 million women entrepreneurs seeing growth in their respective businesses over the next five years.
The participation rate of women in the entrepreneurial sector varies depending on geographical region. Kelly et.al. reports that the disparity in participation rates is very wide. Pakistani women entrepreneurs for example, account only for 1% of the female population of the country whereas about 40% of all the women in Zambia are entrepreneurs. In terms of Total Entrepreneurial Activity (TEA), 27% of the population in the Sub-Saharan region of Africa are engaged in entrepreneurship and about 15% of the female population in Latin America/Caribbean are entrepreneurs as well. The MENA region reports the lowest TEA levels of only 4%. The MENA region reports the greatest equity disparity in terms of TEA levels, with a ratio of four male entrepreneurs to one female entrepreneur .
In recent times, the subject of women entrepreneurship has received a wide-ranging attention from all corners in Saudi Arabia. The attention comes from the massive potential those women entrepreneurs could bring to the Saudi Arabian economy. The current conditions have never been better for women. Firstly, Saudi Arabia has a very young population. The average age of Saudi nationals is about 26 years old (27 for male sand 24 for females) . Traditionally, entrepreneurial development favours economies having a younger average population. Secondly, there is a political emphasis on developing entrepreneurs in Saudi Arabia. With the leadership of King Abdallah, Saudi Arabia is on its quest for modernization. The King’s personal ideology and political inclinations has steered the country towards drastic economic, social and political changes such as the opening of education and business opportunities for women, the creation of an investor-friendly business environment, the prioritization of jobs for Saudi nationals and other sweeping reforms . Because of this forward looking perspective from the Saudi government; advancement of the welfare of women is greater than in previous periods of the country. Saudi women are more educated, ambitious and determined. In the last 40 years, the Saudi government has built an educational infrastructure that reduced illiteracy rates, especially in women. Because of a favourable environment for entrepreneurship, the possession of advanced education and the presence of still a very limited amount of employment opportunities for women in Saudi Arabia, the interest for entrepreneurship are very high among women. Added to this is their substantial economic powers and their capacity to tap financing, women are in a very unique position for creating and running new businesses.
Several studies have been made and developed regarding how to encourage more and more Saudi women to make entrepreneurial ventures. According to Minkus-McKenna (2009) women constitute about 45.5% of the Saudi Arabian population. However, as Minkus-McKenna (2009) stated, female literacy rate in Saudi Arabia is 71% and about 58% women study in University, Education is compulsory for females, which means the Saudi women can play good roles in business. In another word, Saudi women are contributing to Saudi Arabia's economy and development and are making endeavors to fully utilize their skills and potentials to become successful in their entrepreneurship. As estimated in 2005, there were about 23,000 women involved in business in Saudi Arabia. In addition, about 4% of the total registered businesses are owned by Saudi women, 97% of those businesses are either in finance, construction, retail, wholesale or business services (Welsh, Memili and Al-Sadoon, 2012).
In 2007, Arab News published the top 20 list of businesses owned by Saudi women. The changing trend of viewing women as potential contributors to growth is noticeable in the statement made by the newspaper that takes pride in the success of Saudi women. “Saudi men have traditionally been the entrepreneurs but our women are no longer standing in the shadows. They have stepped into the light and have become the backbone of society. We in the Kingdom are fortunate to have well educated, financially powerful women” (Almaeena, 2007).
Moreover, much of the wealth in the country being under the control of women, women entrepreneurs have easy access to informal funding. Since many Saudi women take part in running the family businesses, they own about 40% of those companies run by families as silent partners. Overall, Saudi women are estimated to have cash funds worth SR45 billion. However, is deposited in banks (Minkus-McKenna, 2009). Furthermore, according to view by Gressani (2007) by given the chance to Saudi women they could do much more than what they are doing now if the barriers and challenges they face in conducting businesses can be overcome. Already Saudi women outdo Saudi men in arts, education and science and with given opportunities they will do the same in business and industry as well.
4.2 Challenges Faced by Saudi Women Entrepreneurs
Saudi women are often perceived as less active than their counterparts in other parts of the globe. However, this is not necessarily true. Women entrepreneurship is on the rise in Saudi Arabia despite still being very much in the shadows of the oil-based national economy. There is a considerable lack of reliable data on the impact of Saudi entrepreneurship to the total national economy of Saudi Arabia . Estimates from the Global Entrepreneurship Monitor report of 2009 indicates that the participation rate in Saudi Arabia is about one female entrepreneur for every ten male entrepreneurs . There is a very limited number of scholarly works on entrepreneurship and Saudi Arabian women yet of the literature available for peer review, it can be concluded that Saudi Arabian women are under-represented. This means that the potential for women entrepreneurs is large and remains untapped.
Saudi Arabian women also face unique sets of obstacles include gender-specific challenges that affect their ability to contribute positively to the economy. As stated by Sherif-Trask (2006) Saudi women face many challenges as women entrepreneurs face in the world, especially in conservative countries where women are looked upon as mother and wife primarily and are expected to stay indoors. Also, they have to look after their household first instead of going out and work. Furthermore, understanding the challenge and opportunity for Saudi women have some impact for example, they have to take permissions from the family in their business, which might impact on the women itself and lead to delay in their business procedures. In other words, as Olga (2013) States: “Women are expected to have the consent of their guardian (a husband usually, or otherwise a father or close male relative) for virtually every activity—including work, school, and travel ’’
Women face innumerable challenges such as, cultural barriers and family resistance while starting a business. According to Minkus-McKenna (2009) till date, Saudi women are prohibited from driving a car, starting a business on their own, investing in real estate and purchasing a home. They cannot even lodge a crime at the police station without a male guardian. Furthermore, Saudi women are imposed on them a large number of restrictions, especially their mobility. According to Hamdan (2005) claims that they are banned from driving and because there are not enough public transportation or not safety for women to transport with it they often need to hire a chauffeur, bearing an extra cost. They also need to acquire their legal guardian's permission for traveling overseas and this requirement puts them at considerable disadvantage, as they cannot move freely. Due to the lack of effective implementation of the government policies in support of Saudi women entrepreneurs, they often need to get into a negotiation with government officials on whose whims the success of their deals largely depends on. Many a time they become subjected to personal danger and corruption of bribes (Lavelle and Al Sheikh, 2013).However, according to Welsh, Memili and Al-Sadoon (2012) the biggest obstacle of all faced by women entrepreneurs in Saudi Arabia is the obligation to acquire permission from the 'Wakil' before going ahead with any business venture. 'Wakil' is a male guardian who can be a relative or a total stranger acting publicly on behalf of the businesswoman and has full authority and power to take business related decisions and access to the business assets. Besides, although they have a university degree, but the educational system in Saudi Arabia does not educate women with business skills and business relevant education to support economic growth of women in the country. For instance, a survey conducted by Alturki and Braswell came up with the finding that 80% Saudi businesswomen were in need of financial management knowledge. There are other obstacles like the requirement to appoint a male manager. As a result this requirement subjects the women entrepreneurs to intense humiliation and mental stress resulting out of constant interference and harassment by male managers. This requirement also costs an added expense and limits the businesswomen's freedom to make individual decisions. Women entrepreneurs also face very limited licensing options with many business activities popular among women not being listed in the official licensing categories (Lavelle and Al Sheikh, 2013).
These obstacles can be summed up into the complex matrix of economic, political and social factors that remain as the greatest barrier to effective entrepreneurial participation of Saudi women. Clearly there remains a challenge in terms of policy and regulatory environment for Saudi women entrepreneurs. Some aspects of the current government policies are believed to be deficient and inadequate in promoting and sustain women’s entrepreneurship .
According to Lavelle and Sheikh there is still a clear lack of enforceable policy for enhancing economic activity for Saudi women. There is some policy direction but in many cases, there are deficient measures for proper policy implementation. There is also a clear challenge in licensing procedures for women. While some of the licensing procedures are challenging for any entrepreneurs, they are more complicated for women. Examples of these complications are the lack of correct information especially for women-led business establishment. Without proper information, women entrepreneurs are discouraged and their confidence levels are diminished. The slow bureaucratic process also damages the entrepreneurial drive.
In addition, there remains restricted access to public services for women entrepreneurs in Saudi Arabia. The government has established “Ladies Sections” which cater to public services for entrepreneurs but these women still rely on male relatives for assistance.
Clearly a lot more could be done to improve and increase women’s participation in economic growth for Saudi Arabia and this could be achieved with the proper establishment of a political environment that would address these challenges.
GEM , 2009. Global Entrepreneurship Monitor2009 Women’s Report, s.l.: s.n.
Hamod, D., 2010. Cultivating the Entrprenurial Ecosystem in Saudi Arabia. [Online] Available at: http://www.saudiembassy.net/files/PDF/Publications/Magazine/US-Arab_Tradeline_Spring_2010.pdf
Index Mundi, 2013. Saudi Arabia Demographics Profile 2013. [Online] Available at: http://www.indexmundi.com/saudi_arabia/demographics_profile.html[Accessed 17 March 2014].
Kelley, D. J., Brush, C. G., Greene, P. G. & Litovsky, Y., 2013. Global Entrepreneurship Monitor2012 Women’s Report , s.l.: Global Entrepreneurship Reserarch Association.
Lavelle, K. & Sheikh, H. A., 2013. Giving Voice to Women Entrepreneurs in Saudi Arabia, s.l.: Asbridge Business School.