Peer-reviewed articles women entrepreneurs in russia SMALL BUSINESS in A BIG COUNTRY
Interviews from three communities in a Russian region illustrate that there are many new opportunities for potential women entrepreneurs, while there are also many at times unpredictable obstacles to overcome.
Published in the printed edition of Baltic Worlds BW 1 2012, pages 15-17
Published on balticworlds.com on april 10, 2012
As a result of the priority structure in place at the time, mass privatization in Russia in the early 1990s was in many respects far from equitable, resulting in both winners and losers. Among the clear winners were the directors of high-priority oil and gas industries, most of them men.2 Those in former high-priority sectors, for example heavy industry, were on average less fortunate, since the performance of these sectors generally deteriorated and led to closings or bankruptcy, which meant that the owners lost their wealth. Both women and men involved in heavy industry lost their fortunes. At the same time, many women benefitted from the privatization of the low-priority consumer goods industry. In the course of mass privatization in 1994—1995, some of these women were able to transform their enterprises into private firms. Despite an obsolete industrial structure and a need for investment, it was also possible to build up small-scale production with limited resources in this sector. Some women who were bosses in other low-priority sectors, such as trade, culture, health, and education, also benefitted from the privatization process.
Setting up a private business is something new; it was not possible during the Soviet period. Women have taken advantage of this new opportunity and set up businesses in traditionally female sectors that had low-priority status and underdeveloped economic activity during the Soviet era. In the early 1990s, female entrepreneurship was primarily oriented towards science, consulting, retail trade, and services. Women also started small-scale businesses in the fields of childcare, healthcare, education, dressmaking, knitting, handicrafts, and fruit and vegetable production. According to official statistics, 90 percent of production in the female-dominated consumer goods sector takes place in small firms. This sector is growing and is fairly competitive. It may also be that women have benefitted from a positive attitude towards female entrepreneurship. Women are believed to be responsible and to be trustworthy in their business relations, since they are assumed to be driven by the need to support their families. They are also expected to run businesses with social aims.
Meanwhile, women had few resources to build up sustainable entrepreneurship, with the possibility of expansion beyond the level of merely treading water. According to the national labor force survey in Russia, the share of women among individual entrepreneurs in 2007 was 41 percent. The sharpest increase in the number of self-employed women occurred between 1996 and 1998; it actually doubled during this time, when unemployment reached its peak level. There also seems to be a positive correlation between female entrepreneurship and male unemployment.
Interviews from three communities in a Russian region illustrate that there are many new opportunities for potential entrepreneurs, while there are also many at times unpredictable obstacles to overcome.3 Women have set up trade firms, but firms have also been set up for processing timber, berries and mushrooms, and agricultural products, as well as in the textile and tourism sectors. All the interviews paint the same picture. The arbitrary enforcement of rules and treatment by authorities forces the female entrepreneurs to rely on several sources of income. Politicians and municipal officials are “in the hands of the oligarchs”; consequently, the large male-managed firms do not have to worry about rules that apply to smaller ones. But there are also examples of how mayors have helped small female entrepreneurs with various facilities, renting them commercial property, or even lending them money.
The interviews support the impression that it has been more difficult to start small businesses in recent times than it was just after the privatization reforms in the 1990s. One reason could be that it was easier to get hold of equipment needed to get started, since one could take over existing equipment, or buy it cheaply, from old state firms. Another reason could be stricter rules for obtaining licenses. Despite many problems, individuals still try to start their own businesses. Possible explanations could be high general levels of tolerance towards risk-taking, too little knowledge of difficulties that may be faced, personal networks, the fact that having one’s own business is the only way to support oneself, or simply that this is something the individuals really want to do. The insufficiencies of the legal system are not of major importance; people still try, even if they have difficulties with the registration and licensing of their activities. Several said explicitly they did not want business partners or collaborators from outside the family. The perceived instability of the situation has meant that people are hired on an informal basis, especially at unlicensed businesses.
The stories of Ludmila, Daria and Anastasia
The stories of the business development processes of three female entrepreneurs will illustrate what the situation might be like.4
Ludmila lives with her husband and two children in a town of some 10,000 inhabitants, situated 600 kilometers from the regional capital. As a teenager, Ludmila had dreamed of starting her own business. Anxious to realize her ideas as soon as she had the possibility, in 1992, at the age of 19, Ludmila took over a sewing machine from the textile firm where she was working. She took a loan to buy all the equipment she wanted from the state-owned firm at a very low price, since it was about to close down, and she also took over the ten employees. She was thus one of those who bene-fitted from privatization reforms in the early 1990s. She registered her firm in 1993, producing traditional costumes and work clothes.
Ludmila developed her textile enterprise slowly, and did not invest in new technically advanced machines until there was enough capital within her own business. She collaborates with her husband: she told about how he invested money that he earned from timber cutting in her textile firm, while she helped him with bookkeeping. Only after twelve years did she start to make some money. Both explicitly said they did not want partners from outside the family. She also told about how her husband stayed at home with their newborn baby when she returned to run her enterprise a couple of days after giving birth.
Ludmila runs the sewing activities connected with her shop in the village. She had employed some young women with small children; they were able to work at home, although this meant they could not utilize the modern equipment. She was sewing to order only, due to the limited buying capacity in the area. These orders included ladies clothes, costumes and work clothes for firms and linens for restaurants. She said her expansion was limited by a lack of skilled staff in the local community. Her solution was to train her staff herself. In 2008, she had opened a new shop in a town 400 kilometers away. The number of employees had increased to 18. She had been considering moving to the town as she felt it was not possible to expand in the local community where most people are poor apart from those who were already her customers. But she had decided to stay in the village and to keep on with the sewing there, where the rents are low, while also sewing on orders to the town. Ludmila had also expanded her activity to include sewing curtains and interior decorating, which she had learned by attending special courses in the town.
Daria lives with her husband and three children across the river from a village of 5,000 inhabitants, 10 kilometers from the municipal center and 600 kilometers from the regional capital. For five years she tried to get a license for her tourism business without success; she was one of those who ran her business without being registered, and the community knew it. In her case, this was due to land registry problems. Daria felt unsafe, since her family had built houses without being registered as legal owners. Finally, at the end of 2006, her “rental cottages” business was registered. Her financial capital came from retail trade and timber cutting. Together with her husband, she started a sports school that was free for children. Their salaries for this activity were paid by the state. The couple had also run a shop in the village together with some relatives. Although they earned very little from this shop after paying salaries and taxes and repaying loans that they had taken out in order to start it, some money was left to put into the development of a tourist business. By renting out the shop, they got money to build a house of their own to live in as well as other houses. (Timber for building your own home is free).
The tourism business has been built up gradually, step by step. In 2008, five houses were made available for rent to tourists, the first of which had been built in 2003. From the money earned over the years, they have also been able to build a sauna, a café and a building for administration. Gradually the ski and tourism center is being developed, partly by state money and increasingly with money from the private sector. Daria expresses a fear of being absorbed by one of the larger local entrepreneurs: “As long as the firm is small it is your own, but if you start to grow somebody will buy you up.” Nevertheless, she is proud to be an example of how to “start with two empty hands” and develop your business little by little, using income from timber and trade to finance the development of tourism activities. Daria tells about how she handles all the “begging” she is exposed to, being perceived of as a successful local entrepreneur. She has to choose what she wants to support, as she can’t contribute in all areas. She has chosen ski-related activities for children, which dovetail with her public employment as a ski instructor.
Food shops in the municipal center continue to be important sources of money for the development of the tourism business. But Daria believes that new rules concerning the sale of alcohol will cause problems for smaller food shops, and hence lower financial capital from trade that can be used to develop their business. Daria expresses the opinion that, while it has been possible to earn a lot of money in the grocery business, it has gradually become harder, due to new tax rules and various restrictions. Nevertheless, it has been quite easy to get permits for shops, cafés, restaurants, recreation and sports facilities, while it has not yet been possible to get a license for a hotel. The development of the tourism business with the gradual expansion in the number of employees has facilitated life for the private household, which benefits from cooking, cleaning, building repairs, maintenance of vehicles, and even on some occasions childcare.
Anastasia lives with her husband in a beautiful village of 1,000 inhabitants some 100 kilometers away from the municipal center and almost 700 kilometers from the regional capital. She has three adult children. One daughter, one son and three grandchildren live in the same village. She was the director of a local child care unit for 25 years who in the early years of perestroika, in the early 1990s, became a local politician for a couple of years. After not being re-elected, she decided she wanted to realize her ideas about developing her own business. Consequently, she was eager to apply to take part in the SIDA-financed project (see note 3), an opportunity she became aware of through her engagement in the development of the community. Anastasia tried to get started by means of borrowed money; she ran a business processing berries and mushrooms for almost five years without a license.
Anastasia describes how her proposal was accepted by five municipal officials, while a sixth person said no. She hired an electrician who made the electric installations that she required to get started, but when the inspector found out that the electrician did not have the required permit, she was fined. According to her, this happened because the inspector had learned about safer installations in Sweden. Then she had to get hold of the only licensed electrician in the region, borrow more money from her son-in-law to pay him, and make the electrician come to her village and redo the necessary installation.
According to Anastasia, municipal officials have the same mentality as they did under the Soviet regime, restraining people who have ideas of their own. She had bribed three persons, but said she would have to bribe another one to get her license. She felt that the possibility of setting up a business depended very much on how administrators deal with the various permits that are needed, and she said she sensed right away whether it was worthwhile to talk to a particular bureaucrat or not. She felt that administrators and officials behave differently, and as there are many hierarchies to go through, it seems likely that obstacles will appear on at least one of the levels. Anastasia’s own experience provides an illustration. She was anxious as setting up her business and getting started had become much more costly than she had expected. She had borrowed money from relatives, the municipal administration, and three entrepreneurs. She had already invested in modern equipment, but needed to borrow more in order to get the necessary documents to get started.
For the pioneers in a given field, there appear to be obstacles of which the person who is in the process of starting a business is simply unaware. Anastasia described how she was simply unaware of all the permits she needed to get started. For instance, she needed permission from the health authorities, the fire authorities, and the energy authorities, and she did not know in advance how much she had to pay for each permit. Neither was she aware of quality control procedures, how much she had to pay for each product or how often, the need to give monitoring authorities three kilos of dried mushrooms each time, and present each product to the center for standardization and certification three hundred kilometers away.
Anastasia described how she and her husband survived thanks to their small pensions, the sale of meat from their own cattle, her little shop, and the sale of products from her non-registered business. Her firm was finally registered in mid-2007, but in her daughter’s name, in the framework of a family business in the same village.
Concluding remarks at the end of May 2011
What has happened in the municipality since the last time I was there? Starting with the municipal administration, I learn that they now have a young male glava (municipal commissioner), and a new deputy commissioner, Olga, one of participants in the SIDA project, and former director of the cultural center in Ivaksha. The previous deputy commissioner has become minister of culture at the regional level. This new glava defeated his predecessor, Andreev. It was interesting to hear the various views about this, some positive, some not — some people believing that the new glava doesn’t know anything, isn’t spearheading any projects, and that he was elected simply because people do not want Andreev back. Andreev had been glava at the time of my first visit to the municipality eight years earlier, in 2003. I remember that Andreev had had the old politruks (political commissars), who worked for United Russia, against him. Then when we met him in 2008 he said he finally joined the party because it made it easier for him as an entrepreneur. I learn that the new glava is not a party member — interesting that this did not prevent him from being elected. And it was he who convinced Olga to accept the job as deputy commissioner; like her predecessor, she comes from the cultural sector. As Olga put it at the time, her predecessor, whom I have met several times, most recently in 2008, thus managed to get the job that she was hoping to get, once she realized that people were not ready for a woman glava in the municipality.
We have called Sergei and asked him to meet us, but Olga also comes to the train, with her chauffeur, to greet us. She is very well dressed, with high heels there in the grassy slope, and she is eager to set up a rewarding agenda for us. This time I am traveling with Irina.
Lunch is waiting for us at the café. It’s just the two of us — it’s pretty late in the afternoon. This time we get the nearest house, with two bedrooms, living room, kitchen unit, toilet, and a shower with sauna. For the first time we have a sauna in our own house. I see that there are now a few more houses, and that there is a fine red fence that separates the cottage area from the next lot. Daria has given birth to her fourth child. Maxim is a strong little chap at eleven months. They seem to have quite a few employees, just like the old days. Daria solves her own family’s needs for meal preparation, laundry, carpentry, babysitting, and car repairs as part of her business. One of the employees is also an “extra mother” to the youngest son — she is available around the clock.
Now Daria is finally registered as the owner of the land, and thus of all eight houses. This is important to her, some of the uncertainty is gone, and now she has the possibility of selling a house if she ever wants to. They have a buffer now. Each house is registered separately. Daria thinks that things are right now, she feels satisfied with having positioned herself in the middle ground — the concept is that it should be simple but comfortable. “This doesn’t make sense for people who want to strike it rich”, she says. But getting there through the forest is still difficult; the municipality does not want to pay for road improvements. Nor is anyone registered as a private owner of the road, so nothing happens.
I often encounter the view that “there is no need to save money today in Russia”. “We live for the day”, they say. Sergei thinks that the state should support agriculture; the land previously used for farming has been transformed into open ground. “It’s easier to fell the forest, then there’s money right away, you cut and sell. But agriculture requires a little work first, and then you might get something, but now nobody wants to wait.” There is still no dairy in the municipality.
Tania, a politician at the lowest local level, believes this is because the men who planned it did not have enough patience. “If it had been women, it would have gotten done”, she says.
I want to try to convey my view of today’s Russia, that special blend of Soviet mentality woven together with unrestrained entrepreneurship, “business po russkii” and “russkaia demokratiia”. The impression I carry with me is very much one of misery, hopelessness, and recklessness. But there are also many bright spots, those people who find ways to weave past the various obstacles, even in the middle of it all — all these amazing people who make the impossible possible! ≈
- The introduction is based on Ann-Mari Sätre, “Women’s Work in Transitional Russia: Women’s Strategies for Entrepreneurship and Survival in Russian Regions”, in M. Kangaspuro, J. Nikula, & I. Stodolsky (eds.), Perestroika: Process and Consequences, Helsinki 2010, pp. 330—350.
- Putin, however, managed to collect a considerable portion of the income flows that had previously gone directly into the private pockets of “oligarchs”, so that some of the profits are diverted to the state budget.
- In 2003, 2005, 2006, and 2008, I conducted 50 interviews in connection with the follow-up of a project financed by the Swedish International Development agency (SIDA), which began in 1999. Fifteen people took part in this project aimed at helping individual entrepreneurs to start their own businesses. I interviewed 11 women and three men (basic information about the situation of a woman who was not interviewed was collected through interviews with others). The project involved education in business development and law, assistance in developing business plans, law, and a study visit to Sweden, where the participants visited individual entrepreneurs in the same business sector. In 2008, one of the three who was running a business, a woman, had run her textile firm since 1993. Another woman had finally been able to have her firm for “individual living” registered in 2006. A third woman had, after a long struggle, succeeded in having her processing firm for berries and mushrooms registered in 2007, although in her daughter’s name. One of the men had been able to set up a Swedish-Russian timber-cutting firm in 2003, with a Swedish companion, but was out of business in 2008. Some of the others who had tried were running their businesses without being registered. One of the men had died and one of the women had moved to St. Petersburg. Apart from the participants in the project, interviews in three communities were carried out with other individuals who have succeeded or failed to start their own firms, as well as with politicians and municipal officials. At the regional level I talked to a vice-governor, a vice-chairman, and a member of the regional duma.
- I interviewed these three women (we can call them Ludmila, Daria, and Anastasia) several times in each of the years 2003, 2005, 2006 and 2008, and I have also on a few occasions interviewed some of their family members.