Why Women Entrepreneurs in Peru Lag in Informal Firms but Match Men at the Top

A new World Bank Policy Research Working Paper, developed by the Economic Policy Global Department, the Gender Group, and Peru’s Grupo de Análisis para el Desarrollo (GRADE), takes a hard look at how gender influences the performance of small firms in Peru. Written by Bledi Celiku, Diego Ubfal, and Martin Valdivia, the study draws from two unique datasets, the 2022 Informal Sector Enterprise Survey (ISES) and the 2023 Enterprise Survey (ES), to map the realities of male- and female-led businesses. What it reveals is a sobering picture: while women are the majority among informal entrepreneurs, their businesses underperform compared to men’s, and the disparities are most striking at the bottom of the performance ladder.

The Unequal Ground of Informal Entrepreneurship

Informality dominates Peru’s entrepreneurial landscape, particularly in urban hubs like Lima and Trujillo. Here, women own about 60 percent of informal firms, many of which are small, young, and run from home. These businesses tend to cluster in retail and food-related activities such as street vending or restaurant services. Men, by contrast, are more likely to operate in services like equipment and vehicle repair, which generally yield higher returns. The numbers are telling: informal female-led firms post 15 percent lower sales and 36 percent lower profits than male-led ones. Labor productivity appears similar when measured in simple terms, but once logarithmic adjustments are made, female firms lag. Employment patterns also highlight the divide. Women-led firms employ fewer workers overall, especially paid employees, though they employ proportionally more women. In practice, this suggests that while female entrepreneurship creates opportunities for women, it also reflects concentration in small, low-margin niches with limited room for expansion.

A Sticky Floor, Not a Glass Ceiling

The research introduces a crucial concept: the “sticky floor.” This term describes how female entrepreneurs are trapped at the bottom of the performance distribution, where profits are negligible and businesses barely survive. At this level, women face multiple disadvantages, fewer years of experience, stronger domestic responsibilities, and weaker access to networks or external markets. By contrast, the study finds little evidence of a “glass ceiling.” Once women reach higher-performing informal firms or formal enterprises, gender gaps fade, and in some cases, women even surpass men in productivity and profitability. Yet, representation dwindles as performance rises. In the lowest sales decile of informal firms, women make up 69 percent of managers, but in the top decile, the share falls to 39 percent. Among formal firms, only 22 percent of managers are women, underscoring how barriers block entry into the upper tiers of entrepreneurship.

Why Home-Based Businesses Hold Women Back

A striking finding is the role of business location. Women are far more likely than men to operate from their homes, with the difference reaching 19 percentage points. The reasons reveal the weight of social norms. Women cite childcare duties and safety concerns, while men justify home-based businesses as a way to reduce costs or avoid taxation. Home-based operations, however, are strongly linked to lower sales and profits. This single factor explains nearly 70 percent of the observed gender gap in profits among informal firms, making it the most powerful driver of inequality. The study’s decomposition analyses confirm that once observable factors like location, sector, and education are accounted for, the adjusted performance gaps shrink sharply. At the higher end of the firm spectrum, these barriers matter less, as larger firms tend to be urban, less tied to retail, and more professionally managed.

Unlocking Women’s Potential Through Policy

The policy implications are clear and urgent. Expanding access to affordable, high-quality childcare and reducing the disproportionate burden of unpaid domestic work would give women more freedom to run businesses outside the household. Encouraging transitions from retail to more profitable sectors could also open opportunities. Structural barriers must be addressed as well: women need better access to finance, mentorship, training, and formalization pathways. Land titling and stronger property rights for women could reduce the constraints that tie many female businesses to home premises. Crucially, interventions should be tailored to women’s position in the firm life cycle, supporting survival entrepreneurs differently from growth-oriented ones. By doing so, policies can ensure that female entrepreneurs who have the capacity to scale are not held back by systemic disadvantages.

The report paints a complex picture of gender and entrepreneurship in Peru. Women dominate the informal sector in numbers but lag behind in outcomes, not because of lack of talent or ambition, but because of the structural and cultural constraints that bind them to lower-productivity activities. At the top of the spectrum, women’s firms are just as strong as men’s, but too few make it there. Bridging this divide is not only a matter of gender equality but of economic efficiency. By addressing the sticky floor through childcare access, better property rights, and stronger institutional support, Peru could unlock a vast reservoir of entrepreneurial talent, boosting productivity and fostering a more inclusive economy.