Earlier this month, a bipartisan bill became law that could fundamentally change how the United States’ primary aid agency engages on women’s economic issues. The Women’s Entrepreneurship and Economic Empowerment (WEEE) Act, shepherded by Ivanka Trump with the support of USAID Administrator Mark Green and several congressional champions, outlines the obstacles that prevent women from achieving their economic potential, and calls on USAID to integrate gender analysis into its financial inclusion work. The bill affirms what we know: women face unique structural, legal and institutional barriers in the economy, closing the gender gap could add trillions to global GDP, and USAID has a critical role to play in operationalizing a US women’s economic empowerment strategy.
What does the legislation do?
Beyond signaling to the world that the US is serious about women’s economic empowerment, the bill:
Requires that 50 percent of USAID’s small and medium enterprise (SME) resources be targeted to reach enterprises owned, managed, and controlled by women.
Mandates that USAID track and measure improvements in women’s economic empowerment.
Integrates gender equality and women’s empowerment throughout USAID’s program cycle, and codifies USAID’s policy of employing gender analysis in shaping policies and activities.
Revises language in the Foreign Assistance Act to broaden the scope of development programs on micro-enterprises to micro, small, and medium-sized businesses.
How does the bill fit into the larger US women’s economic empowerment agenda?
It helps to consider the legislation Congress passed late last year, spearheaded by Rep. Lois Frankel (D-FL) and former Rep. Ed Royce (R-CA), in the context of the broader, soon-to-be unveiled White House initiative. White House senior advisor and First Daughter Ivanka Trump has indicated the administration-led effort involves have three pillars: vocational education and skills training, promotion of women entrepreneurs, and eliminating barriers and creating enabling environments. This bill falls squarely into the second pillar, as does another public project with Ivanka’s backing, the Women Entrepreneurs Finance Initiative (We-FI), a facility housed within the World Bank. We-Fi’s ability to shift the attention toward SMEs has been encouraging, though it’s yet to translate into significant financing. $350 million was raised from 14 countries, and thus far $112 million has been allocated to the Asian Development Bank (ADB), International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Islamic Development Bank (IsDB).
What’s missing from the WEEE Act?
The WEEE Act effectively synthesizes the evidence case for women’s economic empowerment, broadens the language around women-owned businesses, and provides a foundation for USAID to incorporate gender more extensively into its programming. Along with We-Fi, the bill lays the foundation for a greater US role in this area through USAID and international financial institutions. That said, some questions remain unanswered:
How does the expanded language on women-owned businesses translate into policy operability?
While the new law draws attention to the distinctions between micro, small, and medium-sized enterprises, it will be incumbent upon USAID to reevaluate funding across different enterprise sizes. USAID also needs to consider beyond-aid approaches to empowering women-owned SMEs, including procuring from women’s businesses abroad, increasing women’s access to markets, and encouraging governments to strengthen investments for entrepreneurs. A challenge remains in reaching enterprises at the bottom of the pyramid.
Will USAID use sex-disaggregated metrics to measure both the supply and demand of financial services?
The Act requires USAID to strengthen its monitoring system for microenterprise and financial services programs to include performance goals “on a gender disaggregated basis.” Laudable as that is, it’s not clear what it would cover. Data collection such as surveys on financially excluded women and existing micro-project evaluations (demand side) fails to account for the supply side (lenders and service providers). A closer examination of potential biases in lending practices by financial institutions and government agencies is essential to ensuring women have truly equal access to the full range of financial services.
The WEEE Act doesn’t address subjective measures of empowerment. How can USAID do more in this area?
Interventions that “empower” women often conflate improvement in wellbeing and improvement in income. This is tricky because empowerment is a largely unobservable process that relies of self-reporting, but it’s not impossible. When USAID considers women’s empowerment, the agency should look at women’s barriers and wants. For example, providing access to quality childcare may not increase income, but it may increase quality of life. USAID’s task is to employ suitable behavioral and attitudinal measures of empowerment.
Will USAID explore the possibility of paired interventions and cross-sector collaboration?
As the legislation notes, women face several obstacles to economic empowerment that cut across sectors, systems, and geography. Paired interventions, such as ones that provide both business training and access to financial services to beneficiaries, can have a multiplier effect on economic outcomes and empowerment. CGD randomized control trials of mobile savings programs in Indonesia and Tanzania proved just that. In both countries, business training boosted the effects of having access to a mobile savings platform, with businesswomen saving significantly more when they were exposed to both interventions. These findings make the case that targeting both supply-side and demand-side constraints works in different contexts.
The bill emphasizes gender-based analysis: but what about gender-responsive budgeting and gender-mainstreaming?
Incorporating gender analysis and integrating gender equality throughout the entire USAID program cycle are important steps that are included in the new law, but it would be great to see US policy go further. There’s plenty of room for an initiative that addresses gender-equitable tax, expenditure, and budgeting policies, which Canada and Sweden, while not perfect, have made a point of emphasizing. Economic empowerment, too, requires a “whole-of-woman” approach. Efforts should be taken to promote women’s education, security, and capacity across all sectors and contexts. There is opportunity for mainstreaming women’s economic empowerment in USAID efforts in trade, climate change, and conflict, to name a few.
How will the WEEE Act and the White House’s forthcoming initiative address entrenched gender bias in business and financial environments?
The WEEE Act rightly points to discriminatory legal and regulatory barriers as major impediments to women’s economic empowerment, even quantifying some of those barriers. That said, reducing the gender gap on access to capital, property, and other quantifiable measures is not sufficient. A better understanding of why the structural barriers exist is critical to mapping what to do about them. One relatively simple goal is to ensure surveys aren’t constructed (as they often are) with baked in biases that overstate women’s economic dependence. Increasing financial literacy through training, changing mindsets on women in the economy, incentivizing banks to better serve women, hiring women in all levels of government, and incorporating women throughout global supply chains are some of the many approaches that USAID should explore—bolstered by its WEEE Act mandate.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
Image credit for social media/web: Gaganjit Singh/UN Women