What’s the connection between electricity and women? Electricity is an agent of empowerment, able to transform societies and economies in emerging markets.
It paves the way to buying home appliances like electric cookers, refrigerators and washing machines, freeing up women from hours of daily housework.
In our view, more access to electricity in developing countries will be a catalyst for more women to join the workforce, leading to huge changes in consumer spending patterns.
In developing countries, women’s job opportunities have typically been limited. With so many responsibilities in the home—and no household appliances to ease the burden—most women find working outside the home to be impossible.
Less than 40 per cent of all adult women in the 12 largest emerging markets (excluding China) participate in the labour force, according to the latest World Bank data.
Not much has changed over the past two decades. Since 1990, the female workforce participation rate has stagnated in emerging markets while it has increased in the developed world.
In China, the female participation rate has dropped from the very high level maintained during the country’s communist history. In other countries, such as India, there has been little change.
Electricity can make a difference. For example, we believe the Indian government’s ambitions to significantly upgrade electricity supply across the country by 2019 could be a major impetus for change.
In South Africa, providing electricity led to a big boost in women entering the workforce. In areas that benefited from the electrification programme, the female workforce participation rate jumped by 9.5 percentage points over five years through 2001, according to an academic study.
Translating this to India, if Prime Minister Narendra Modi’s reported ambitious plan to connect 400m people to power grids is successful, it could enable 8m women to enter the workforce by 2019, our analysis suggests. But much will depend on whether enough power is provided to enable the typical family to run basic appliances.
Perhaps the most important benefit of electrification is refrigeration. For example, Smita, a 38-year-old working mother we met in Aurangabad, India, could save several hours a day if she had a refrigerator, since she would no longer have to go to the market constantly to prepare fresh meals for her family.
Indeed, our research into the use of 150 refrigerators in emerging markets found that the lower social classes use them primarily as time-saving devices in which to store their essential foods or prepared meals.
This gives women the flexibility to work more hours and contribute to the overall family income, which in turn leads to women having a bigger say in how the family money is spent.
With more influence from women, family spending patterns should change. Academic studies show that women have a longer-term focus than men when it comes to financial decisions—a finding that our own grass roots research confirms.
When family incomes increase, men tend to spend the extra money on short-term purchases such as consumer electronics or entertainment. Women tend to spend it on items with longer-term potential, such as education, savings and insurance products. So, as women gain more influence over household incomes, we expect spending in these areas to grow.
Joining the workforce could have dramatic knock-on effects. As more women gain a say in household finances, they’re likely to strive to pull their families out of poverty, helping to create a better-educated and more productive workforce.
And many countries are ripe for change. In Indonesia, a third of the population—81m people—don’t have access to electricity. In Nigeria, half the population—76m people—have no power.
These trends aren’t usually on the radar of the typical investment fund. However, we believe that electricity is actually a powerful leading indicator and a great example of how disruptive forces can have unintended and far-reaching consequences.
Private education, microfinance and insurance are just a few areas that could enjoy a burst of activity—and create investment opportunities.
More broadly, we think investors should consider the many ways that female empowerment could affect economies, industries and companies, when looking to capture the potential of consumer spending across emerging markets.
Tassos Stassopoulos
