Economic Research Forum (ERF)

Gender differences in business record-keeping and planning in Iraq

1422
Only one in every ten informal businesses in Iraq is led by a woman. Yet as research summarised in this column reveals, those businesses are more likely to set budgets and sales targets, and to keep business records. This may be evidence of the role of social exclusion in motivating greater reliance on the formal bureaucratic system.

In a nutshell

Well over half of informal enterprises in Iraq do not keep written business records, do not set sales targets and do not create budgets for their future costs; around 45% lack the practice of preparing income statements or maintaining written budgets for monthly costs.

Informal enterprises with women owners have a significantly higher probability of having a written monthly budget for costs, and a significantly higher inclination to set sales targets for the upcoming year.

Factors such as business size, use of computers and financial facilities, experience with the need to pay bribes for continuing operations, and owners facing lower levels of time poverty are positively associated with the practice of setting sales targets.

Record-keeping and planning are foundational steps for businesses seeking to make the transition from being in the informal sector to contributing to the capitalisation of assets and the overall process of firm growth. This column presents evidence on whether there is a relationship between the gender of informal business owners and their involvement in business record-keeping and planning in an emerging economy.

In this context, extensive research has been conducted on gender differences, focusing on leadership, management and organisational dynamics in established enterprises, as well as the ways in which women and men engage with household finances and informal businesses. In a broader developmental context, it has also been investigated how business record keeping plays a key role in businesses transitioning from an informal stature to becoming established in economies, thereby contributing to economic growth (for example, Aladejebi and Oladimeji, 2019).

This study centres its focus on Iraq, a country with a tragic history of geopolitical instabilities that have led to its economy being predominantly characterised by the informal sector. Given this context, the eventual ‘legitimisation’ of the informal economy holds significant importance for its short-term economic development. Consequently, by examining Iraq, where only 10% of informal businesses are led by women, this study analyses the role of social exclusion in motivating a greater reliance on the formal system, or as described by Rothschild-Whitt (1979), ‘formal bureaucracy’.

Our survey

The data for this study were collected from 1,996 informal sector businesses come from the recent Informal Sector Business Survey (ISBS) conducted by the World Bank Group in four major cities in Iraq: Baghdad (34.07%), Basrah (30.01%), Sulaymaniyah (14.73%), and Najaf (21.19%). The data collection period spanned from August 2021 to February 2022.

The objectives of the survey were as follows: i) to understand the demographics of the informal sector in the aforementioned cities; ii) to describe the operating environment of these businesses; and iii) to enable data analysis based on representative samples from each city.

We employ three proxies to assess businesses’ record-keeping: (i) keeping written business records; (ii) preparing income statements; and (iii) having a written monthly budget for costs.

As proxies for business planning, we also use: (i) having a target for sales over the next year; and (ii) making a budget for the next year’s costs.

The primary initial question is formulated as follows: ‘Does this business or activity keep written business records?’ The available response options for respondents are ‘Yes,’ ‘No,’ and ‘Don’t Know (Spontaneous).’ To quantify this variable, we create a dummy variable that takes the value of 1 if the respondent selects ‘Yes’ and 0 for ‘No.’ We exclude 26 responses categorised as ‘Don’t Know.’

For the second question in the survey, we consider the following dependent variable: ‘Does this business or activity prepare a profit and loss statement at least once a year?’ 54.06% and 45.14% of respondents selected ‘Yes’ and ‘No,’ respectively. To measure this variable, we generate a dummy variable that takes the value of 1 if the respondent indicates ‘Yes’ and 0 for ‘No.’

The survey findings reveal that approximately 54% of informal enterprises do not keep written business records, while around 45% lack the practice of preparing income statements or maintaining written budgets for monthly costs. In terms of business planning, the results indicate that approximately 56% of Iraqi informal enterprises do not set sales targets, and 58% of them do not create budgets for their future costs.

Our analysis and main results

We find evidence that informal enterprises with women owners have a significantly higher probability of ‘having a written monthly budget for costs’. Additionally, this probability is positively associated with owners who use financial facilities, possess education from technical schools and universities, and experience less time poverty.

The results also reveal that the probability of keeping written business records is significantly higher among Iraqi informal enterprises where the owner and business are older, the owner possesses more than primary education, and uses financial facilities such as bank accounts and business contracts. Furthermore, the analysis demonstrates that record-keeping is significantly more prevalent in Basrah and Najaf compared with Baghdad.

Regarding business planning, our findings indicate that informal enterprises led by women exhibit a significantly higher inclination to set sales targets for the upcoming year. Additionally, factors such as size, use of computers and financial facilities, encountering the need to pay bribes for ongoing operations, and owners facing lower levels of time poverty are positively associated with this practice. These results align with the findings related to record-keeping. Informal businesses in Basrah and Najaf demonstrate a greater inclination towards planning compared with informal entities in Baghdad.

Although our results align with critical feminist theory, which suggests that gender-based behavioural differences can stem from historical factors, we attribute our findings to the reliance of marginalised groups on rational bureaucratic systems due to their exclusion from dominant relationship networks. Our results will be of interest to academics and policy-makers concerned with gender development, economic development and the social dynamics of marginalised groups within dominant cultures.

Further reading

Aladejebi, O, and JA Oladimeji (2019) ‘The impact of record keeping on the performance of selected small and medium enterprises in Lagos metropolis’, Journal of Small Business and Entrepreneurship Development 7(1): 28-40.

Gholipour, HF, JW Goodell, I Cheratian, S Goltabar and O Lahmar (2023) ‘Gender Differences in Business Record Keeping and Planning: Evidence from Informal Enterprises in Iraq’, Review of Middle East Economics and Finance 19(3): 187-208.

Rothschild-Whitt, J (1979) ‘The collectivist organization: An alternative to rational-bureaucratic models’, American Sociological Review 509-527.

Most read

A Macroeconomic Accounting of Unemployment in Jordan:  Unemployment is mainly an issue for adults and men

Since unemployment rates in Jordan are higher among young people and women than other groups, unemployment is commonly characterised as a youth and gender issue. However, the majority of the country’s unemployed are adults and men. This suggests that unemployment is primarily a macroeconomic issue challenge for the entire labour market. The appropriate response therefore is coordinated fiscal, monetary, structural and institutional policies, while more targeted measures can still benefit specific groups.

Tunisia’s energy transition: the key role of small businesses

Micro, small and medium-sized enterprises (MSMEs) play a critical role in Tunisia’s economy, contributing significantly to GDP and employment. As this column explains, they are also essential for advancing the country’s ambitions to make a successful transition from reliance on fossil fuels to more widespread use of renewable energy sources. A fair distribution of the transition’s benefits across all regions and communities will secure a future where MSMEs thrive as leaders in a prosperous, inclusive and sustainable Tunisia.

The hidden potential of Jordan’s small firms for driving a green transition

For Jordan, a green transition represents an enormous transformative opportunity. But a decade-long increase in the use of renewable energy has not freed the country of its economic woes. This column explores the currently underused yet potentially powerful force of micro, small and medium-sized enterprises – and proposes policies that could improve the investment climate and clear legislative and regulatory barriers.

Global value chains and sustainable development

What is the role of exchange rate undervaluation in promoting participation in global value chains by firms in developing countries? What is the impact of the stringency of national environmental regulations on firms’ GVC participation? And how do firms’ political connections affect their participation in GVCs? These questions will be explored for the MENA region at a special session of the ERF annual conference, which takes place in Cairo in April 2025.

Adoption of decentralised solar energy: lessons from Palestinian households

The experience of Palestinian households offers a compelling case study of behavioural adaptation to energy poverty via solar water heater adoption. This column highlights the key barriers to solar energy adoption in terms of both the socio-economic status and dwellings of potential users. Policy-makers need to address these barriers to ensure a just and equitable transition, particularly for households in conflict-affected areas across the MENA region.