A Gender‐Based Performance Analysis of Micro and Small Enterprises in Java, Indonesia

Micro- and Small Enterprises in Java The Republic of Indonesia, a geographically diverse country with a population of 207 million, has been able to achieve high rates of economic growth. However, despite three decades of rapid growth, the economic structure is still based on informal or traditional activities in which most people are employed. Indonesia's labor force is growing at a substantially faster annual rate (2.7 percent) than the population as a whole (1.6 percent) (World Bank 2000). The government of Indonesia is faced with a challenge of providing long-term sustainable employment and income opportunities for the growing rural labor force. The promotion of Micro and Small Enterprises (MSEs) as a strategy to promote employment in rural areas has received considerable recent attention in Indonesia, as well as in other developing countries. Recent economic turbulence and concerns with growing economic and social inequalities in Indonesia has stimulated discussions of means and objectives of government policies regarding small businesses ( Singh et al. 1999). The potential contribution of MSEs to generating employment and income in densely populated rural areas of Asia has been documented(Liedholm, McPherson, and Chuta 1994). Their development is seen as away of providing aid to the poor and creating job opportunities for the under-employed (Humphrey and Schmitz 1996). Female-Owned Enterprises in Developing Countries The majority of female workers in developing countries has entered the labor force through the MSE sector, primarily because of ease of entry and limited access to other enterprises and employment opportunities. Research in Africa and Asia show that females and males exhibit significantly different priorities in production and consumption. Females contribute larger proportions of their personal income toward household expenditures than males and thus are able to retain less profit for reinvestment (Bruce and Dwyer 1988). Tinker (1987) and Downing (1990) suggest that females have different business strategies and objectives than men. Women's motivation is often household survival, whereas men are more often business-motivated. Therefore, male business owners are more likely to reinvest profits into the business. Effective policies and programs to support the development of MSEs depend critically on adequate knowledge of characteristics and constraints of MSEs. Also, given the growth of entrepreneurship among women, it is important to understand the social and economic factors influencing the success of female-owned small business. This article is an attempt to examine the micro- and small-scale enterprise at two levels: the individual and the enterprise. The specific objectives of this study are: (1) to present a descriptive profile of enterprises in Java by gender; (2) to examine the rate of growth of employment in Indonesia by gender and type; and (3) to determine the factors influencing the performance of female enterprises in Java. Such an understanding is crucial to the evolving policy debate involving the MSE sector. Factors Affecting Performance of Female-Owned Enterprises Prior studies suggest that social structures such as workplace, family and organized social life affect females' access to entrepreneurial opportunities and may influence performance (Aldrich 1989). Sekarun and Leong (1992) found that in South America, expectations that women's primary responsibilities are childcare and domestic tasks create a barrier to venture creation and subsequently venture performance. Research also reveals that female enterprises are frequently hindered by a lack of business information, advice, and access to networks and business support systems (Allen and Truman 1993). It is important to note that public policy initiatives designed to increase women's access to information, skill improvement, and funding are underway in many developing countries (Organization for Economic Cooperation and Development (OECD) 1993; Allen and Truman 1993). …