NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Before the end of 2008, I explained in one of my posts how improving gender equality could reduce poverty and stimulate growth. Back then I was puzzled to see that barely any business development initiatives had tried to improve women’s status (Karthik Raman’s Source for Change was one of the few exceptions) – especially considering the potential latent demand in female oriented educational programs or health care.

In this post I would like to point out how this demand is set to increase in the next few years. This may be one of the biggest untapped BoP opportunities from the point of view of the profits to be made and the social value that the involved businesses could generate.

Family preference of boys over girls in developing countries is often expressed through higher mortality rates in young girls and lower investments in the girl’s human capital (lower school enrollment, nutrition or immunization rates). Son preference has been argued to be a consequence of conditions in rural societies in which inheritance systems pass assets to sons, inter-generational insurance in which sons care for the parents in the old age, and a job market which offers higher salaries to men than women.

Development and, in particular, urbanization, higher female education and labor force participation are expected to work against these pressures (Chung and Das Gupta, 2007). I recently came across a World Bank study (Filmer, Friedman and Schady, 2009) which explained how South Asian families are 7.8 percentage points more likely to have an additional child if they had no sons than if they had no daughters (because they so badly want a son that they keep on bearing children until they get one). Eastern Europe and Central Asia experience yet higher rates with the chances of having an additional child being 9.4 percentage points higher if the family has no sons than if it has no daughters. Notice that the more children a family has, the more disadvantaged a girl will be compared with a boy, because the family resources will be more thinly spread.

As a result of higher mortality rates, the trends in male/female sex ratios of children in many Asian countries have skyrocketed. We have all heard the stories about the Chinese and Indian countryside now facing a shortage of female population. It is often forgotten that this phenomenon was even bigger in South Korea. Sex ratios were tilted in favor of men during the 1980s and the mid-1990s and thereafter declined so rapidly that by 2007 they were within the biologically normal range. Some of the effects are still felt, with many men often having to marry with Vietnamese or Chinese brides (who sometimes suffer isolation and abuse when settling in South Korea) due to the shortage of local women.

Extrapolating from the South Korean case another recent World Bank study (Das Gupta, Chung and Shuzhuo, 2009) has come to the conclusion that we may be about to see a similar fall in sex ratios in India and China. That is, there will be proportionally more young girls coming in the next decades in these two countries.

Why is this important? To put it simply because there is and will continue to be a growing number of girls and female adolescents with unmet gender-based needs. Latent demand will tend to be most important in the arenas of health care and education – and national and regional governments will most probably support businesses catering to these groups. Families will also be increasingly willing to spend in the wellbeing of their girls. BoP ventures targeting these demographic groups will soon discover that their market is growing very fast and is increasingly profitable – a dream for many businesspeople. In turn, this will generate a positive feedback effect, since female economic empowerment reduces poverty much more than male economic empowerment. This looks like a prospective market where BoP business initiatives have high chances of making a big splash.

If in some years you read a Wall Street Journal or a Financial Times article about how female birth rates have recently increased in Asia and how this has stimulated economic growth, remember where you read it first…!