DETERMINANTS OF WOMEN ENTREPRENEURSHIP IN INDONESIA Tulus T.H. Tambunan Center for Industry, SME and Business Competition Studies, Trisakti University, Jakarta-Indonesia Abstract This research aims to assess the intensity of women as entrepreneurs in Indonesia. It also seeks to examine the key determinants of women involvement as entrepreneurs. Results show that the representation of women entrepreneurs in Indonesia is still low, and they are concentrated mainly in micro and small enterprises. However, as Indonesia does not have national data on women entrepreneurs, this study may not give the comprehensive picture. Nevertheless, it stresses that a wide gap still exists between male and female entrepreneurs in Indonesia, and it also fills the gap in the literature on women entrepreneurship in less developed countries.

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1. Introduction Recently, there is an increasing interest in women entrepreneurship development among policy makers, academics and practitioners in developing countries. This interest comes from the recognition that the creation of women entrepreneurship, especially in rural areas, will contribute to the creation of many new rural enterprises that will help much to reduce poverty, especially in rural areas. In other words, women entrepreneurs can play an important role not only in promoting social and economic development but also in improving community welfare in rural areas. Moreover, in relation to the UN-initiated MDGs, development of women entrepreneurship should be seen as a crucial element of women empowerment as among the goals. Due to their characteristics such as easy entry, flexibility in working hours and production processes that make women able to combine between running a business and doing their traditional domestic duties, less capital requirement, and no need for highly educated persons, micro, small and medium enterprises (MSMEs) are generally believed to be the right place for women to become entrepreneurs, especially in rural areas. Of course, the degrees of these characteristics of MSMEs vary by type of economic activities or industry. MSMEs in food and beverages industries may need less capital and less educated individuals to run a business than, for instance, in industries producing electronics or manufacturing automobile components. It is not surprise, therefore, to find that women entrepreneurs or as owners of MSMEs in less developed countries (LDCs), especially in rural areas, are concentrated in only certain industries like food and beverages, handicraft, footwear, and leather products. In Indonesia, despite the increasing awareness of the importance of women to have full access to education and economic activities, including as entrepreneurs, until these days only

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very few studies have ever been made to examine women as entrepreneurs, and not so much attention has been given to entrepreneurship in MSMEs by gender (although studies on MSMEs are many and secondary data on this group of enterprises is available) for at least two main reasons. First, no national data on total number of women entrepreneurs and their key characteristics in Indonesia is available to start a study with. Indonesian Women Entrepreneurs Association (IWAPI) also does not have a database on total number of women entrepreneurs, except some information on its members, who are mostly located in big cities. But, of course this is a global problem. Second, most people in Indonesia still see that research on women entrepreneurs is part of women studies, which are not yet so popular. Especially among Indonesian economists, women studies are regarded as not fully an economic area. Findings from this research may therefore fill the gap in the literature on women entrepreneurship in LDCs by showing most recent fact on women entrepreneurship development, especially in MSMEs in Indonesia. It may also add more information which is needed by the Indonesian government in its efforts to support women empowerment in relation to its commitment to support the implementation of the MDGs.

2. Research Questions, Objective and Methodology With the above background, the main objective of this study is to examine the development of women entrepreneurs in Indonesia with the focus on MSMEs for the reason mentioned before. More specifically, it aims to answer the following three questions. First, how has been the development of women entrepreneurs, especially in MSMEs in Indonesia recently? Second, what are the main constraints for women to become entrepreneurs in Indonesia? Third, what are the

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main motivations/reasons for women to do their own businesses instead of staying home and doing domestic works or working outside home as employees in somebody else’s businesses? As it is a descriptive study in nature, methodologically, the study adopts three approaches: analysis of secondary data (i.e. data from Indonesian Central Bureau of Statistics and reports from selected international agencies such as UNDP, World Economic Forum and Social Watch); review of literature on women entrepreneurs in LDCs. Journal articles, books, reports, and seminar papers on women entrepreneurs in both developed and developing worlds are so many, started significantly in the 1980s (see e.g. Minniti and Naudé, 2010, for their survey of the literature), and the review in this study will focus only on most recent key international literature and Indonesian case studies on main motivation of women undertaking own businesses and factors affecting them; and a small field survey on 100 randomly selected firms owned or managed by female with maximum 50 workers. The main aim of the survey is to explore their main underlying reasons or motivations behind their decision to become entrepreneurs.

3. MSMEs in Indonesia Historically, Indonesian MSMEs have always been the main players in domestic economic activities, accounting for more than 99 percent of all existing firms across sectors (Table 1) and providing employment for over 90 percent of the country’s workforce, mostly women and the youth. The majority of them are micro enterprises (MIEs) and small enterprises (SEs), whereas the number of medium enterprises (MEs) is only few. MIEs are dominated by self-employment enterprises without wage-paid workers. In 2009, for instance, the share of these tiny enterprises in total MSMEs or in total MSMEs plus large enterprises (LEs) is almost 99.0 percent. They are scattered widely throughout the rural areas, and, therefore, are likely to play an important role in

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helping to develop the skills of villagers, particularly women, as entrepreneurs. However, most MIEs are established by poor households or individuals who cannot find better job opportunities elsewhere, either as their primary or secondary (supplementary) source of income. Therefore, the presence of many MIEs in Indonesia is considered as a result of current unemployment or poverty problem; rather than as a reflection of entrepreneurship spirit (Tambunan, 2009a,b). Table 1: Total enterprises by size category in all economic sectors,Indonesia, 2000-2009 (000 units) Size MIE & SE ME LE Total

2000 39,705 78.8 5.7 39,789.7

2001 39,883.1 80.97 5.9 39,969.9

2003 43,372.9 87.4 6.5 43,466.8

2004 44,684.4 93.04 6.7 44,784.1

2005 47,006.9 95.9 6.8 47,109.6

2006 48,822.9 106.7 7.2 48,936.8

2007 47,720.3 120.3 4.5 49,845.0

2008 52,327.9 39.7 4.4 52,262.0

2009 52,723.5 41.1 4.7 52,769.3

Source: State Ministry for Cooperative and SMEs (www.depkop.go.id) and Indonesian Central Bureau of Statistics (BPS) (www.bps.go.id)

Besides number of employees, annual revenues, or value of invested capital as criteria to define MIEs, SEs and MEs, in fact in Indonesia (as in developing countries in general) MIEs can be distinguished easily from SEs or MEs just by reference to their different characteristics in many aspects, such as formality or ways of doing business, market orientation, social-economic profiles of their owners/producers, nature of employment, organization and management system, degree of mechanization (nature of production process), sources of main raw materials and capital, location, external relationships, and degree of women’s involvement as entrepreneurs (Table 2). Those latter characteristics may suggest that in Indonesia within MSMEs, MIEs, and to a lesser extent, SEs, in general, are female enterprises, as women as entrepreneurs are mostly found in these enterprise categories.

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Table 2: Main Characteristics of MIEs, SEs, and MEs in Indonesia. Aspect Formality

MIEs operate in informal sector, unregistered & pays no taxes Majority in rural areas/ villages - run by the owner - no internal labor division -no formal management & accounting system (bookkeeping)

SEs some operate in formal sector, registered & pay taxes

Nature of employment

majority use unpaid family members

some hired wage laborers

Nature of production process

- degree of mechanization very low/mostly manual - level of technology very low

some use up-to-date machines

Market orientation

majority sell to local market and for low-income consumers

-many sell to national market and export -many serve also middle to high-income group

Social & economic profiles of owners

- low or uneducated - from poor households - main motivation: survival

- some have good education, and from non-poor households - many have business/profit motivation

Sources of inputs

- majority use local raw materials and use own money

- some import raw materials -some have access to bank and other formal credit institutions

External networks

- majority have no access to government programs and no business linkages with LEs

- many have good relations with government and have business linkages (such as subcontracting) with LEs (including MNCs/FDI).

Women entrepreneurs

ratio of female to male as entrepreneurs is the highest

ratio of female to male as entrepreneurs is high

Location Organization & management

Many in urban areas/cities - run by the owner - no labor division (majority), -no formal management and accounting system (bookkeeping)(majority)

MEs all operate in formal sector, registered & pay taxes Mostly in urban areas/cities -many hire professional managers, -many have labor division, formal organizational structure & formal account-ting system (bookkeeping) -all hired wage laborers -some have formal recruitment system many have high degree of mechanization/access to modern technology -all sell to national market and many also export - all serve middle and high-income consumers - majority have good education - many are from wealthy families - main motivation: profit - many use imported raw materials - majority have access to formal credit sources - majority have good access to government programs - many have business linkages with LEs (including MNCs/FDI) ratio of female to male as entrepreneurs is low

Source: Tambunan (2009a).

4. Women Entrepreneurs in LDCs: Development and Underlying Main Reason According to ILO (2010) between 1980 and 2008, the rate of female labour force participation increased from 50.2 to 51.7 per cent. In countries and regions where participation rates at the 6

beginning of the period were below the world median, the increases were much more dramatic. On the other hand, in some countries where female labour force participation was much higher than the median in 1980, probably due to the prevalence of poverty in the country and the necessity of working for survival, the rates showed a decline over the period. However, as stated in that report, gender disparity in terms of both opportunities and quality of employment continues: female employment-to-population ratios have generally increased over time but remain at levels well below those of men. This report is about changes in labour force and employment in countries in the world. It does not deal explicitly with women entrepreneurs in developing countries. However, it provides data on women engagement in self-employment activities, either as employers (i.e. selfemployed with employees) and own-account workers (self-employed without employees). Especially in low-income/poor countries where job creation in the formal sector is a rare phenomenon, there is a strong tendency for both women and men to engage in these activities; although men have a greater tendency than women to be involved in these activities. In Indonesia as in many other developing countries, especially in the low-income/poor countries, based on number of workers or total initial assets (excluding building and land), or annual revenues, selfemployment activities are really very small size activities, and mostly they are non-modern units of businesses (in terms of degree of computerization, mechanization, organization, management and technologies used). In Indonesia, these activities are included as MIEs or SEs. So, data from this report may give some clue about the importance of MIEs and SEs for the development of women entrepreneurs in developing countries. According to the report, a high proportion of wage and salaried workers tends to indicate advanced economic development while large shares of self-employment activities tend to

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indicate low economic development and high levels of poverty. This can be seen in Table 3, suggesting that there is a positive correlation between poverty and the importance of selfemployment activities for women (as well as men) either as entrepreneurs or paid-workers. SubSahara Africa is much poorer than East Asia, and in 2009 about 45 percent of total working women in the first region engaged in self-employment activities as entrepreneurs (employers or own-account workers), compared to around 35 percent in the second region. In rich region/developed countries, it was only around 8 percent. Table 3: Women Engagement as Entrepreneurs in Self-Employment Activities by Region, 2009 (% of Total Working Women) Region

Sub-Sahara Africa North Africa Middle East Latin America & Caribbean South Asia Southeast Asia & the Pacific East Asia Central & South Eastern Europe (non-EU) & CIS Developed economies World

Self-employment with employees (employers) 1999 0.5 3.2 1.2 2.2 0.5 0.9 1.1 0.6 2.4

2008 0.7 3.0 1.3 2.6 0.8 1.2 1.4 1.0 2.2

2009 0.6 2.9 1.3 2.8 0.9 1.3 1.5 0.9 2.1

1.3

.15

1.5

Self-employment without employees (own-account workers) 1999 2008 2009 50.1 44.2 44.7 13.8 15.3 15.4 36.7 28.2 28.7 25.1 22.4 22.5 25.7 33.3 33.0 25.7 30.2 28.9 27.7 33.6 33.7 15.6 13.5 10.9 6.5 6.2 6.2 24.3

26.9

26.9

Source: ILO (2010). Minniti and Naudé (2010) did a study on the growth of women entrepreneurship and they come with the following main important findings. First, rates of women’s entrepreneurship are higher in developing countries than in developed countries. According to them, the main reason of this higher rate is most likely out of necessity, as in many of these countries it is more difficult for women to get jobs in the formal labor market. Second, the gender gap in entrepreneurship is narrower in low-income countries than in middle-income countries. Again, probably out of necessity. Women in low-income countries are less afraid of failure. Third, married women are

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more likely to become entrepreneurs than are non-married women. Fourth, women-owned businesses tend to grow more slowly than men-owned businesses. In The Global Employment Challenge published by ILO in 2008 (Ghose, et al., 2008) it is stated that there are many powerful forces at work in determining the engagement of female in the labour market, such as the level of economic development, social norms as well as religious norms. There is also a widely-held belief that women participation in economic activities as entrepreneurs is also greatly influenced by those factors. In overall, from key literature on women entrepreneurs in LDCs, at least five main characteristics of development of women entrepreneurship can be obviously observed . First, the intensity of women as entrepreneurs or owing own businesses is still low; though the rate varies by country. Sinhal (2005), for instance, observed that less than 10% of the entrepreneurs in South Asia, comprising Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, are women, Others such as Raju (2000), Ganesan (2003), Goheer (2003), and Tambunan (2009b,c) also confirm with that fact that the intensity of women entrepreneurs in LDCs is still relatively low. Second, MSMEs are more important than LEs for women entrepreneurs, as women face more constraints to enter LEs, especially lack of education/knowledge and shortage of capital. This may explain why more women are found in MSMEs than in LEs as business owners or entrepreneurs (e.g. Tambunan, 2009b,c). Third, within MSMEs, the female-male entrepreneur ratio is generally higher in MIEs than in larger sized and modern enterprises. This is due to the fact that women in developing countries are more likely than men to be involved in informal activities which consists dominantly of MIEs, either as self-employed or employers or paid/unpaid workers. For instance, ILO (2010)

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states that it is especially in low-income/poor countries where job creation in the formal sector is a rare phenomenon, particularly for women, there is a strong tendency for women to engage in these activities. Whereas, Chen (2000, 2001) has found that the main important characteristic of African women is their active engagement in the informal economy, either self-employed or unpaid workers in family enterprises. Seibel and Almeyda (2002) studied the main economic activities of rural women in Uganda, and they also found that MIEs constituted the major source of rural employment in the country, and participation rates in self-employment are not so different for women (47%) and men (53%); but MIEs predominate among women (77%; males: 23%). Fourth, many women doing own businesses as a means to survive (they are pushed to do that because all other options for work are either absent or unsatisfactory), not to exploit perceived business opportunities. Based on its survey in 41 countries (including developing countries in Asia and Latin America), the Global Entrepreneurship Monitor in its 2007 report (GEM, 2007) labels the first group as necessity entrepreneurs and the second one as opportunity entrepreneurs. Even, in low income/poor countries, the ratio of necessity to opportunity entrepreneurship is significantly higher in the high income country. From South Asian countries, such as Das (2000), Seymour (2001), and Sinha (2003) suggest that there are three categories of women entrepreneurs that is. “chance”, “forced” and “created” entrepreneurs. These different categories are based on how their businesses got started, or the main reasons or motivations behind starting their own businesses. Chance entrepreneurs are those who start a business without any clear goals or plans. Their businesses probably evolved from hobbies to economic enterprises over time. Forced entrepreneurs are those who were compelled by circumstances (e.g., death of a spouse, the family facing financial difficulties) to start a business, their primary motivation,

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hence, tend to be financial. Created entrepreneurs are those who are “located, motivated, encouraged and developed” through, for instance, entrepreneurship development programs. According to Das (2000), the most common reasons given were either financial reason or to keep busy. He found that only about one fifth of women were drawn to entrepreneurship by “pull” factors, for instance, the need for a challenge, the urge to try something on their own and to be independent and to show others that they are capable of doing well in business. It is often stated in the literature that the degree of women entrepreneurship development is closely related to the degree of gender equity, which in developing countries is generally lower than that in developed countries. Although, within the developing countries, the degree varies by country, depending on many factors, including level of economic development, reflected by the level of income per capita, and social, cultural and political factors. Gender equity has many dimensions and it is not easy to measure, due to the lack of accurate, gender discriminated social indicators in many countries, especially in the developing world (Tambunan, 2009c). Fifth, age, work status, education, income, social ties, culture, tradition, family background, marriage status, family obligations, discrimination against women in many aspects of life (which is often the result of gender beliefs inherent in a culture or society), disproportionate bargaining power against men, and public/community perceptions are all significant social, economic and institutional factors in a woman’s decision to start a business (e.g. Fafchamps and Quisumbing, 2005, Justo and deTienne, 2008, and Naudé, 2010).. 5. Women Entrepreneurs in Indonesia 5.1 Review of Selected Previous Studies in Indonesia Studies on women entrepreneurship in Indonesia are scarce. There are more studies on women as workers rather than as business owners or entrepreneurs. Among the few existing studies on women

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entrepreneurs is from Kerstan and Berningham in 1980 who investigated the status and role of women in Javanese society, particularly in rural areas. The research was conducted in one village named Genengan in D.I.Yogyakarta, and it covered women small traders and crafts-women, with some particular emphasis on embroidery crafts-women. The research purpose was to understand the status and roles of women who were doing small businesses within their family and societies. They found that small scale trade sector dominated by women is a Javanese tradition, and the embroidery industry is among popular economic activities for rural women in Java, either as entrepreneurs or paid-workers. Sulaiman (1982) studied crafts-women in two cities in the Central Java province, namely Solo and Semarang, and in D.I. Yogyakarta. The businesses the women engage with are wooden products and batik. The study focuses on the economic role of crafts-women in their family who mostly low income and within their society, with the main aim to answer the research question whether their engagement in works other than household works has given positive impact among these women. The study concludes that the social status of crafts-women increased in the eyes of their family and society, since they were able to earn income for their family, in their society they were known as “business-women”. It does not mean that they face no constraints to run or to develop their businesses, including the traditional one namely limited access to credit from banks and other financial institutions. The crafts-women mostly got the raw materials and debt from rich people with capital, and the debts they owned from capital owner were usually returned when the products were finished or sold. Maemunah (1996) did a research on women entrepreneurs in home-based industry in Batanghari District, Sumatera. The aim of the research was to identify the characteristics of women leadership in a home-based industry and to understand strategic constraints in the

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development of women business. The method used for the research was interview and depth study. Most of her interviewed women entrepreneurs are wives and mothers with age between 21-40 years old, and only about 8.33% of them had finished college. One important finding of the study is that from a business development perspective, most of her sampled female-owned enterprises could not be considered as successful entrepreneurs. But in fact they are still in business mainly because the need of family additional income. In other words, for many of them, the main motivation behind their engagement in the industry as entrepreneurs was mainly dominated by the force of life-need. The second important finding is that the main constraint faced the respondents to develop their business is the lack of capital. Most of the respondents used their own capital or family capital for their business. They hardly able to obtain loan from banks since most of them do not have collateral and as they said, the interest rate is too high for them. However, despite of this capital constraint, as another important finding of the study, women running own businesses in Batanghari District have been found to have increased, which have improve the motivation of local women in managing and organizing their own businesses as family income generating businesses. Sarwestri, et al. (2001) studied women entrepreneurs as well as women workers in the home based industry making mattress in Mekar Mukti village, in Bandung in the West Java province. Mattress industry is also among so-called women industries meaning that the intensity of women involvement in this industry, either as owners or entrepreneurs or paid-workers is very high. They found that most of their respondents have been involved in this industry when they were single, simply because no money to continue their education and also because they wanted to have own income. They kept working in this industry until they are married, especially when their spouse’s income is not enough to support the family. Only about 23,3% of the respondents

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have bank account/or savings in bank, and about 80 percent of the respondents do this work because there are no other income generating works that they can do, mainly because of their low education, mostly elementary school. Many of the respondents who run their own businesses learned the skill of making mattress from learning by doing when they were paid workers in other people’s firms. Purwandari (2002) did a research on handmade bags craft industry in Kulon Progo District the Province of Yogyakarta. Although the main objective of her research was not on women entrepreneurs, but to understand the roles of handmade bag industry on women’s working opportunity and household income, and what sosial factors influence its role, the study does give some important information about women entrepreneurs, as it shows that handmade bag industry is among the most popular industries for women entrepreneurs in Indonesia for many reasons. The reasons include that manufacturing handmade bag is relatively simply work that can be done by uneducated women and married women with children who cannot leave their houses. The study shows that about 60% of women entrepreneurs and workers in her sample enterprises have only elementary school (finished and unfinished); and those who have finished high school are only 7.5%. Although it depends on production volume, type of product (with respect to quality), and market orientation, capital requirement in this type of industry is also not so much. It is also a female labour intensive industry, and, from Indonesian cultural values, traditions and Islamic religious point of views, it is then easier for married women to do this job than in other more male labour intensive industries such as furniture, footwear, building materials and many others. From his own study with a sample of 45 women running their own micro oe small-sized businesses together with and without their husbandsin the city of Blitar (the province of East Java), Widagdo (2003) gives an important but not really unexpected picture that the position of

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women in running their own businesses together with or without their husbands are still mainly dominated by their husbands in many business decision making processes, which is based on Indonesian cultural value that created a “given image” of women as housewives and men as the head of the family. The fact that women also work to contribute to the family income does not considered as “bread earning” activity. In many cases, when women and men have equal or almost equal income, conflicts normally arises and so is the value adjustments, although the conflicts usually not having very serious impact on their marriage and family life. More interestingly is from Arifin (2004) who did a research to understand obstacles faced by women in MIEs and SEs, which includes general problems derived not only from their business’s marginality and informality, but also from gender stereotyping. It proposes the systematic way of understanding women entrepreneurs’ vulnerability for effective empowerment and organizing activity. His important findings include (1) general problems usually faced by women entrepreneurs are risks in economic activity outside law which include (a) discrimination, which includes removal of their business places, (b). exploitation such as illegal charge by preman or even by authoritative agents such as the police or security officers, and (c) vulnerability to price rise, particularly raw materials price rise; (2) exploited and discriminated against are also often based on gender, mainly because they are weak economy players, operate outside the law and their status as adequate resource can actually be women in the gender relation structure; (3); however, most of the women have only limited resources to be used to prevent the negative impacts of these risks; and (4) sources of vulnerability of women entrepreneurs in MIEs and SEs are: (a) gender relation pattern in the family and society economic activities such as collective norms that regulate roles, status, interaction and work

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division, and image of women and men; and (b) intervention of external agents into their economic activities, community’s and family’s life. Dewayanti and Chotim (2004) attempted to investigate women marginalization and exploitation in MIEs and SEs in rural Jawa. The objectives of the study were to highlight two things, namely structural problems in relation to business and gender, and empowerment efforts conducted by various non-government organizations to overcome women marginalization problem and exploitation. This research used a qualitative method with more economic nuance analysis compared to gender analyzes. The concept used to analyze household economic problem and business are marginalization and women’s double burden. The case in this study are rural MIEs and SEs in two industries, namely the coconut processing industry in Banyumas in the Central Java province and the tile industry in Klaten, also in the same province. These are among low technology-based industries dominated by MIEs and SEs and with high intensity of women engagement not only as workers but also as business owners. Based on their findings, they argue that women marginalization and exploitation are causal factors of underdevelopment of micro/small business which has implication of adding woman’s load. This marginalization process generates spreading poverty because most women reside in rural micro/small business. They found that marginalization issue is more urgent for woman than for man because the work division pattern in a household placed woman for employing bigger load or burden for domestic duties. The women’s work selections and effort cannot be separated from family needs’ fulfillment patterns. Economically, work division can be explained by poverty phenomenon, that poor families can get women to give their resource to work for the family needs’ fulfillment. For the efficiency, woman productive works in the business, of course, more positioned in domestic area in order to be able to finish their domestic duty. Facing this difficult condition, women play

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important role for their additional work, like opening stall, looking after cattle and garden, to develop natural saving like productive crop and jewelry, and developing of alternative finance industry like “artisan” and micro finance institution which can give fast credit. They also found that most of the women accompanied by non government organizations feel themselves confident after they can prove to their society and family that they can contribute to the family’s economy. When political and gender issue are introduced, only local cadres who are capable to balance non government organization activity with politics. Whereas, most other woman are not able to follow this activity because they still have to struggle with their family’s economic needs.

5.2 Picture of Recent Development No one can know exactly how many women entrepreneurs in Indonesia, even not in big/modern enterprises. Although Indonesia has a special department for women empowerment as well as ministry specially dealing with MSMEs (i.e. the state ministry for cooperative and SME), they do not have national data on total number of women as entrepreneurs or total number of enterprises owned by women. However, the current Ministry of women empowerment, Mrs , Linda Amalia Gumelar, said in one event that currently total entrepreneurs in Indonesia is just below 2% of the country’s total population of around 220 million people (49% are female), and total women entrepreneurs in the country is estimated below 1%. She said further (though without providing strong evidence) that the majority of Indonesian women entrepreneurs are engaged in MSMEs, and by gender, MSMEs owned or run by women are much more than those with male entrepreneurs (quoted from newspaper Republica.co.id, 30/01/11). In the past few years, IWAPI has been actively doing many training and other programs to produce more women as entrepreneurs. The association has recognized that Indonesia is still a

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backward country with respect to the involvement of women as entrepreneurs. This national women entrepreneurs association has fixed therefore a plan to increase the total number of women entrepreneurs from currently about 0.24% to 2% by 2012. The association has been working closely with the Ministry of Women Empowerment to realize this objective (Bataviase.co.id, 23/06/11). The position of women within the Indonesian society, especially with respect to their education and economic participation (either as employees or entrepreneurs/business owners) can be assessed with some indexes developed by some world-wide organizations. Three indexes are shown here. First, the Global Gender Index (GGI) from the World Economic Forum in Geneva. The Index is designed to measure gender-based gaps in access to resources and opportunities in individual countries rather than the actual levels of the available resources and opportunities in those countries. So, the Index is independent from countries’ levels of development. In other words, the Index is constructed to rank countries on their gender gaps, not on their development level. The Index examines the gap between men and women in four fundamental categories: economic participation and opportunity, educational attainment, health and survival and political empowerment. Countries with higher score (closer to one) mean that women condition in those countries is better than in those with lower score (lower rank).1In its report, The Global Gender Gap 2010, the Indonesia’s rank is 87 out of 134 countries surveyed with the score 0.6615, improved from 92 (out of 115 countries) in 2009 with score 0.6580. But it is still not better than its position in for instance 2007 and 2006 (Figure 1). In 2010 in the first rank is Iceland (0.8496) and in the lowest rank (134) is Yemen (0.4603). Developing countries from Asia within the top 20 are only the Philippines (9) and Sri Lanka (16).

1

For more information about the methodology, see further WEF (2010), or its previous annual reports.

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Figure 1: The Rank of Indonesia for the Gender Gap Index (GGI) from World Economic Forum, 2010

Note: in brackets are total surveyed countries Source: WEF (2010)

Second, the Gender Equity Index (GEI) developed by Social Watch.2The main aim of this index is to contribute to the understanding of gender-based inequities, and to monitor its situation and evolution in the different countries and regions of the world, according to a selection of indicators relevant to gender inequity in three dimensions, namely education, economic participation and empowerment. The index’s range of values is from 0 to 100, with the lower values indicating greater inequity and higher values greater equity. In its most recent report, the Social Watch Report 2010, the 2009 ranks of 157 developed and less developed countries are presented. From this report, Table 4 shows the ranks of ASEAN countries and the values of the three dimensions of the index. As can be seen, within ASEAN, Indonesia is among member

2

Social Watch, a network that today has members in over 60 countries around the world, was created in 1995 as a “meeting place for nongovernmental organizations concerned with social development and gender discrimination.” This network was created to respond to the need to promote the political will required for making the United Nations promises come true. Social Watch, which is continually growing both qualitatively and quantitatively, has published 15 yearly reports on progress and setbacks in the struggle against poverty and for gender equality. These reports have been used as tools for advocacy on a local, regional, and international level (Social Watch, 2010).

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countries with relatively great gender inequity while the Philippines emerges as the greatest gender equity. Table 4: The Ranks of ASEAN Countries for the Gender Equity Index (GEI) and Its Dimensions from Social Watch, 2009 Country Cambodia Indonesia Lao, PDR Malaysia Philippines Singapore Thailand Viet Nam

GEI

Education

Economic Activity

Empowerment

62 55 52 58 76 63 70 74

78.1 96.8 80.6 98.6 98.5 95.0 98.3 96.5

83.5 52.8 59.2 46.6 63.5 58.6 71.7 81.3

23.2 16.0 16.8 29.7 64.8 36.5 40.6 44.0

Source: Social Watch (2010).

Third, the Gender Inequality Index (GII) developed by UNDP. The index is constructed based on three dimensions: labour market, empowerment, and reproductive health. The value of the first dimension is based on the percentage of women participation in the labour force. The value of the second dimension is calculated from two indicators, namely educational attainment (secondary level and above) and parliamentary representation. The value of the third dimension is based on two indicators, namely adolescent fertility and maternal mortality.3In presenting the Index, countries covered are divided into three groups: very high, high, medium Netherlands is ranked first with the value 0.174 and from ASEAN only Singapore is included in the very high human development group which is the 10th place. In the high human development group, only Malaysia from ASEAN is included which is ranked 50. Other ASEAN countries are found tn the medium human development group, subsequently Viet Nam (58), Thailand (69), Philippines (78), Lao, PDR (88), Cambodia (95), and the lowest rank within ASEAN is Indonesia (100)

3

See UNDP (2010), or Human Development Report from previous years for further information on the methodology.

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Table 5: The Ranks of ASEAN Countries for the Gender Inequality Index (GII) and the Values of the Index from UNDP,2008 Country Cambodia Indonesia Lao, PDR Malaysia Philippines Singapore Thailand Viet Nam

Rank in ASEAN 7 8 6 2 5 1 4 3

Value World 95 100 88 50 78 10 69 58

0.672 0.680 0.650 0.493 0.623 0.255 0.586 0.530

Source: UNDP (2010) From Indonesia, there are two main official sources of data on the participation of women as entrepreneurs. The first one is labour data, namely from the National Labour Force which provides information on employment status of working population. It is shown in Table 6, namely doing own business with and without hired/paid workers. The second source is from enterprise data, namely the National Survey on MSMEs. Based on survey data 2006, Table 7 shows that there are more women entrepreneurs in MIEs and SEs than in MEs. In addition, based on survey data 2003 specifically on micro and small enterprises (MSEs), Table 8 shows three interesting facts. First, it reveals that only 32% of these enterprises are run by women. If it is assumed that women entrepreneurs are also very few in LEs, than the evidence may that becoming an entrepreneur in Indonesia is still dominantly a man culture, especially in modern companies.4

4

Unfortunately, since no data are available on the proportion of women-led MEs and LEs in Indonesia, there is no indication on whether the percentage of women owners relative to men decreases or increases as firm size increases. Also, no data exist on the number of women starting enterprises each year, or on their growth rates into the next firm-size category. But, it is probably safe to say that a very small proportion of women in MIEs grow into SEs, and very few women-led SEs grow into MEs and LEs.

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Table 6: Employment Status by Gender in Indonesia, 1990-2006 (%) 1990 Male Paid worker Doing own business with paid worker Doing own business without paid worker Family worker Female Paid worker Doing own business with paid worker Doing own business without paid worker Family worker Male + Female Paid worker Doing own business with paid worker Doing own business without paid worker Family worker Source: BPS (www.bps.go.id)

1995

1996

1997

1998

1999

2002

2006

31.9 1.1 53.6 13.5

39.1 2.1 50.1 8.7

38.4 1.8 52.1 7.7

39.4 2.2 50.3 8.0

36.1 2.3 52.7 8.8

36.2 3.4 51.9 8.5

29.4 4.1 59.4 7.0

35.2 4.0 53.2 7.7

22.8 0.3 30.2 46.6

29.2 0.7 36.8 33.3

27.4 0.8 38.5 33.4

29.0 0.8 34.5 35.7

27.7 0.8 34.9 36.6

28.1 2.0 35.8 34.2

37.3 1.1 25.4 36.2

31.5 1.1 33.2 34.1

28.4 0.8 44.5 26.3

35.6 1.6 45.4 17.4

34.2 1.4 46.9 17.5

35.5 1.7 44.3 18.5

32.9 1.7 45.9 19.5

33.1 2.9 45.7 18.3

32.3 3.0 47.2 17.6

33.9 3.0 46.2 16.9

Table 7: Owners by Gender of MSMEs in Manufacturing Industry in Indonesia, 2006 (%) Gender Male Female Total

Size MEs 77.33 83.75 22.67 16.25 100.00 100.00 Source: BPS (www.bps.go.id). MIEs and SEs

MSMEs 71.01 28.99 100.00

Table 8: Owners of MSEs by Gender and Non-agricultural Sector, 2003 (unit) Sector

Total units

Mining, electricity (non-Stated Own/PLN) & construction

253 146 (100.00)*

Industry manufacturing

2 641 909 (100.00)

Trade, hotel, & restaurant

9 228 487 (100.00)

Transportation & communication

2 170 291 (100.00)

Financial institutions, real estate, renting, and services

1 490 226 (100.00)

Total

15 784 059 (100.00)

Owners Male Female 237 050 16 096 (93.64) (6.36) [2.21]** [0.32] 1 636 185 1 005 724 (61.93) (38.07) [15.25] [19.91] 5 649 138 3 579 349 (61.21) (38.79) [52.64] [70.86] 2 140 022 30 269 (98.60) (1.40) [19.94] [0.60] 1 070 001 420 225 (71.80) (28.20) [9.97] [8.32] 10 732 396 (68.00 ) [100.00]

5 051 663 (32.00 ) [100.00]

Notes: * = distribution percentage by row (sector). ** = distribution percentage by column (entrepreneur) Source: BPS (SUSI 2003).

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5.3 Some Explanations From key existing studies on women entrepreneurs in LDCs (including on women entrepreneurs in Indonesia discussed above in Section 5.1), generally, the relatively low representation of women entrepreneurs in Indonesia can be said to be attributed to at least four main factors. First, low level of education and lack of training opportunities that make Indonesian women severely disadvantaged in both the economy and society may play an important role. As shown before, based on GII, although gender inequality in Indonesia is tending to decline, it is still relatively higher than in neighboring countries. Also, official data on working population by education in Indonesia indicate that, although there has been some improvement in the last 20 years, the average level of education of male is still higher than that of female. The Human Development Index (HDI) 2010 from UNDP (2010) shows that in that year the population in Indonesia with a least secondary education (% ages 25 and older) for female was only 24.2% compared to 31.1% male. This education structure by gender is consistent with Tables 9 and 10, showing that female entrepreneurs have very low levels of education. The first table shows that less than 1% of female entrepreneurs have university diplomas, as compared to their male counterparts at 6.5%. The second table shows that at the national level, only 1.4 percent of total women entrepreneurs in Indonesia are university graduated. Table 9: Education of Entrepreneur in MIEs in Non-agricultural Sector by Gender, 2003 (%) Level of education Not finished primary school Finished primary school Finished high school first degree (SMP) Finished high school second degree (SMA) Higher education Source: BPS (SUSI 2003).

Female

Male

27.88 40.82 18.62 11.77 0.91

14.27 39.49 25.87 18.37 6.5

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Table 10: University Graduated Women Entrepreneurs in MSMEs in Manufacturing Industry by Region in Indonesia, 2004 Region

University Graduated Women Entrepreneurs Number (women) % of total women entrepreneurs

More developed western part -Sumatera -Java & Bali

10.402 58.240

Less developed eastern part -Nusa Tenggara -Kalimantan -Sulawesi -Maluku & Papua National

Total women entrepreneurs

1.4 1.4

740.724 4.030.236

909 4.196 2.365 88

0.3 1.6 1.0 0.2

276.300 266.756 233.686 42.936

76.200

1.4

5.590.638

Source: BPS (www.bps.go.id)

In addition, a report on gender mainstreaming in the education system in Indonesia (Jalal, 2004; quoted from Suharyo, 2005) shows that, the illiteracy rate for women is still higher than that of men, and the gap between men and women in rural areas is much higher than that in urban areas. Many rural women speak only their native language and never read newspapers and so they are very restricted to communicate with the outside world. Particularly among women living in rural areas, there are still many social, cultural and religious taboos that prevent those women who can and should be accessing higher education from doing so. Many parents living in rural areas still have the traditional thinking that (higher) education belongs to men only. Especially since after marriage women leave to join their husbands; families and, hence, are not regarded as being useful to their own families in the long run. This situation of rural women in Indonesia is consistent with evidence from many other LDCs, which indicate that the majority of women accessing higher education still appear to be those who are privileged, who have the support of their husbands or families and living in urban areas. Particularly among women living in rural areas, there are still many social, cultural and religious taboos that prevent those women who can and should be accessing higher education

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from doing so. Many parents living in rural areas still have the traditional thinking that (higher) education belongs to men only. Where there are large numbers of children in a family, the preference is often given to boys because they will be relied upon to support their parents in their old age. Especially since after marriage women leave to join their husbands; families and, hence, are not regarded as being useful to their own families in the long run, or it is commonly believed that a university degree will not help to find a bridegroom. In some part of the developing world, parents might even not send their girls to school at all if schooling goes against local culture and tradition. In some Asian countries these social expectations can further lead to women being financially dependent and unable to travel beyond the immediate neighborhood to participate in studies unless accompanied by a male member of the family, or it can be mean that they are often required to work in unskilled labour because they are willing to work for lower wages than men. In fact, in many areas in developing world, educated women are often seen as a threat to the traditional male authority, so higher education can actually inhibit their chances of finding a marriage partner (Tambunan, 2009b,c) However, although this traditional thinking still exists in rural society, it depends on the economic condition of the family as well as education level of the parents or husbands. The better the economic condition of the family or the better the education of the parents/husbands, the less influence of the traditional thinking in their attitudes towards women to have better education. Second, heavy household chores. Especially in rural areas, women have more children, and they are more demanded to do their traditional role as being responsible for housework and child care, and therefore they have fewer hours of free time than men, both during the weekend and on weekdays. Lee (1995) found that main reasons given by rural, low-income women for not

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participating in education were that they did not want to leave their children or that they did not start a course because they thought their multiple commitments would mean they would not able to attend all sessions. Third, there may be legal, traditions, customs, cultural or religious constraints on the extent to which women can open their own businesses. Especially in rural areas where the majority of population are muslim and rather isolated from big cities like Jakarta, Islamic-based norms have stronger influence on women daily life.. This makes female behavior or attitude in rural areas less open than male (or than urban women) to “doing modern business” culture. In such society, women must fully comply with their primary duty as their husband’s partner and housewife, they are not allowed to start their own businesses or to do jobs that involve contact with or managing men, or simply they are not allowed to leave the home alone. Even if women do have their own business, in many cases, they defer to husbands or other family members in key business decisions, and many turn over greater power to these other family members as the business grows. All these constraints lead to an exclusion of women from entrepreneurial activities. While, in rural areas relatively close to urban areas with good transportation and communication links, changes in local society attitudes about traditional role of women being responsible for housework and child care and men for income in the last 30 years are observable. Quoting Jütting and Morrison (2005), Figure 2 highlights how these social institutions affect the economic role of women, i.e. their chances to have access to the labour market and to better paid and to get more qualified jobs such as professional workers, technicians, administrators and managers or to run freely their own businesses. These social institutions can exert their influence in two ways. They can constrain women’s activities directly, e.g. by not allowing them to run their own business, or to work outside home, or to do jobs that involve contact with or managing

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men, or simply they are not allowed to leave the home alone. Besides these direct effects, social institutions can also impact on the economic role of women indirectly by limiting their access to resources and human capital formation. Figure 2. The Double Effect of Social Institutions in Constraining the Economic Role of Women 2) limit women’s access to resources and human capital formation

Indirect effects

1) Social institutions

Indirect effects

Direct effects

3) Constrain the economic role of women

Source: adopted from Figure 1 in Jütting and Morrison (2005)

All these constraints lead to an exclusion of women from entrepreneurial activities that are often the first step towards independence, self-esteem and liberty of choices. Even if women do have their own business, in many cases, they defer to husbands or other family members in key business decisions, and many turn over greater power to these other family members as the business grows. In Indonesian rural society, especially in rural areas where Islamic norms are very strong and they are rather isolated from big cities, such constraints on women daily life are observable. In such society, women must fully comply with their primary duty as their husband’s partner and housewife. This makes female behavior or attitude in rural areas less open than male (or than urban women) to “doing modern business” culture. However, religion per se does not systematically define such discrimination. All dominant religions show flexibility in interpreting the role of women in society (Jütting and Morrison, 2005). Jütting and Morrison analyse empirically the relationships between social institutions and the economic role of women in more than 60 countries. They measure the depth of discrimination

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caused by social institutions with economic and non-economic indicators. These indicators are aggregate indicators reflecting longstanding norms, customs and traditions that usually have prevailed for more than a century. The economic indicator for a country refers to the family code in place that affects the ability of women to undertake economic activities. The non-economic indicator is composed of variables that have no direct link to the economic role of women. In their study they use three economic indicators, i.e. right to inherit, freedom of movement and dressing, and right to ownership and access to property, and four non-economic indicators, i.e. genital mutilation, marriage before the age of 20, polygamy, and authority over children. Their study results in some interesting findings. First, the higher the value for economic and noneconomic indicators the lower the probability that women will play an active role in the economy. Second, their econometric analysis puts into question the widely believed view that a rise in income will generally facilitate women’s access to the labour market. Third, polygamy, excision, arranged marriages and parental authority (used as proxies for the institutional framework) have significant negative impacts on literacy and enrolment (which measure women inequality in access to education) and life expectancy (which measures women access to health care). Fourth, lack of access to formal credit and financial institutions. This is indeed is a key concern of women business owners in Indonesia. This is found to be more problematic for women in rural areas or outside of major metropolitan areas such as Jakarta and Surabaya. This constraint is related to ownership rights which deprives women of property ownership and, consequently, of the ability to offer the type of collateral normally required for access to bank loans. In Indonesia, men are still perceived as the head of the family, and thus, in general, men are still perceived as the owner or inheritor of family assets such as land, company and house.

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Probably because of the above reasons, especially cultural or religious constraints, in Indonesia, particularly in rural areas, economic necessity or wanting to improve family income is a more predominant factor for entrepreneurship among women. Economic pressures have made that women are being permitted to take up paid employment outside the home or to run income earning activities beyond their traditional role of being responsible for housework and child care.5Even in LDCs with strong Islamic religious such as Bangladesh, economic pressures have meant that women are being permitted to take up paid employment or to do own businesses outside the home (Women’s International Network News, 1990). While, more developed economies such as the United States, or even in Korea, for instance, non-economic motives such as a desire for more fulfillment, or to test a winning idea, or as the first step towards independence, self—esteem and liberty of choices, are more important for women entering into business ownership (APEC, 1999).6 Finally, the participation rate of female as entrepreneurs varies by region (Figure 3). Interestingly, although a larger part of MIE and SEs are located in Java, as also the majority of population, non-primary economic activities, and educated people in the country are found in this island, Nusa Tenggara (NT) in the eastern part of the country has the highest ratio, means that there are more female than male entrepreneurs in NT. However, this does not necessary reflect the higher spirit of female entrepreneurship in NT than in the rest of the country. NT is a region with a very high unemployment rate. Formal economic activities such as mining, manufacturing industry, construction, agriculture and banking are more or less stagnated in this

5

See for example, Syahrir (1986) and Rusdillah (1987). However some recent studies have found that even in developed countries more women have conducted own business merely for economic reasons. For example, Brewster and Padavic (2000) found that in the United States(US), as more men are thrown into unemployment, there is increasing need for women to have an increasing role in earning the family’s income, and this has brought about changes in society attitudes about the traditional role of women being responsible for housework and child care and men for income. 6

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island. Most matured or married men are working in low income generating activities such as transportation, motorcycle repair workshops or in agriculture as marginal/subsistent farmers owning less than 0.5 ha of land, or as civil servants. So, as a family survival strategy, in the household, wife is ‘pushed’ to do something outside home to earn some income. Therefore, the high participation rate of female as entrepreneurs in NT is most likely to be a reflection of a family survival strategy rather than a spirit of entrepreneurship. In other words, female entrepreneur development in NT is more a “push” rather than a “pull” phenomenon.

Figure 3: Ratio of Female-Male Entrepreneurs in Non-Farm MIEs and SEs by Province, 2003. 1.2 1 0.8 0.6 0.4 0.2

Iri an

M al uk u

+

es i Su la w

an ta n Ka l im

Te ng ga ra

Ba li

us a

+ N

Ja va

Su m

at er a

0

Source: BPS (SUSI 2003).

5.4 Main Motivation: Finding from a Small Field Survey As an effort to get more picture about the main motivation or personal reason that women undertake own businesses in MSMEs, a field survey has been conducted with a total of 169 women as entrepreneurs in or owners of MSMEs in 2011. Although the focus of the survey was Jakarta, the Capital city of Indonesia, many respondents were also selected in cities surrounding Jakarta, such as Depok, Bogor, Tangerang and Bekasi, and also some were in outside West Java province. The majority of them were found in micro enterprises with maximum 10 paid workers

30

in various sectors such as trade, restaurants, services, and only a few of them were found in industrial sector. During the survey they were asked about their main reason or motivation to undertake own businesses instead of staying home doing traditional domestic works (especially those who are married), or working as paid employees in firms, or continuing their study. They were given a list of options, namely: (1) to be independent (not working for somebody else or not depending on somebody else’s money/income); (2) to explore or to develop own hobby/skill; (3) because of difficulty in finding jobs (with reasonable incomes); (4) to support family/household income or to add extra income to husband’s low income; (5) to response to market opportunities; (6) to continue family traditional business; (7) to realize long personal wish or dream; and (8) want to be rich or famous. The finding, as presented in Figure 4, shows that the majority of the respondents have chosen option (1), and followed in the second rank by option (4). In overall, no evidence from this survey to support a general view that most women undertaking own businesses even in micro and small enterprises in developing countries are “pushed” to do that. Figure 4: Total Respondents by Main Motivation/Reason to Undertake Own Businesses 2011 (person)

Source: field survey, 2011.

6. Conclusion Recently, there is an increasing interest in women entrepreneurship development among policy makers, academics and practitioners in Indonesia. This interest comes from the recognition that

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the creation of women entrepreneurship, especially in rural areas, will contribute to the creation of many new rural enterprises that will increase local capabilities to bring rural economic growth, and more importantly, it will help significantly the government’s efforts to alleviate poverty. Also, as Indonesia has a strong commitment with respect to the achievement of the MDGs by 2015, of which women empowerment is among the goals, women capacity building, including their capability to become productive and innovative entrepreneurs, in Indonesia has become an important element in Indonesian government’s overall social and economic development plans and policies. However, based on limited data, this study indicates that the representation of women entrepreneurs in Indonesia is still relatively low, which can be said to be attributed to at least four main factors: low level of education and lack of training opportunities; heavy household chores; legal, traditions, customs, cultural or religious constraints on the extent to which women can open their own businesses; and lack of access to necessity facilities to support a business operation such as capital. It is generally believed that the influence or the importance of those four factors as the main constraints will diminish automatically (although the process may be stepwise) with the steady increase in income per capita. In other words, the increase of women involvement in the economic activities either as well-paid employees or as entrepreneurs/companies’ owners is a natural process or an evolution. It is part of the long-term process of social and economic modernization. But, in the meantime, in three policy areas: education, MSME development and labour market policies, women empowerment (not just gender issue in general) should be given high priority.

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