Like in many places around the world, 2023 was a tough year for the economy in Colombia. The 0.6% economic growth was the lowest in the last two decades, with the exception of the pandemic year of 2020. High inflation led to interest rate increases that slowed investment and consumption in the country. These dynamics impacted entrepreneurship, according to the latest GEM Colombia National Report.
From 2019 to 2021, the business environment was improving despite the impact of the COVID-19 pandemic. This trend reversed in 2022 and became more acute in 2023 as evidenced by the GEM National Entrepreneurial Context Index (NECI). Colombia’s score in the index went from 4.5 in 2022 to 4.1 in 2023, placing the country in 37th place among the 49 GEM participating countries.
Only three conditions — education at the university level, social and cultural norms, and access to physical and service infrastructure — were rated as sufficient. The other nine NECI entrepreneurial conditions for entrepreneurship were assessed by experts as insufficient. Most negative were school-level entrepreneurship education, government policies, financing, and the transfer of research and development.
In terms of TEA – the percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business – the 2023 figure of 23.5% is a 4.5 percentage point decrease from 2022. Similarly, the percentage of established entrepreneurs (in business for more than 42 months) decreased by 1.7 percentage points (3.1%).
The predominant motivation in starting a business was to survive due to job shortages. In 2023, for approximately every seven people who started a new business, only one person owned an established business. Also concerning is that the main cause to stop running a business was lack of profitability. This result differs from what was observed in 2021 and 2022 when the pandemic was the first reason why businesses in Colombia ceased their activities.
In terms of gender, women were more likely than men to start a business in 2023. There were approximately five women starting a business for every four men doing the same. However, men are more likely to have an established business, underscoring the need for greater social support and access to resources for women.
To improve the entrepreneurial conditions in Colombia, the following five recommendations are proposed to enhance the entrepreneurial ecosystem in Colombia:
1. Promoting business and managerial training by providing free access to educational programs in business administration and management skills, integrating entrepreneurial education from basic to university levels to establish a strong foundation for future entrepreneurs.
2. Improving access to financing is crucial, necessitating clear and stable financial support policies, tax reductions for entrepreneurs in their initial years, and efficient management of public and private seed capital offerings.
3. Strengthening the collaboration between universities, the state, and the private sector is vital to facilitate financing, product and service validation, and the creation of a robust support ecosystem. Also put in place permanent spaces for interaction among entrepreneurs, companies, investors and clusters at national and international levels can stimulate collaboration and growth.
4. Investing in science and technology within universities and businesses can drive innovation and competitiveness, ensuring early-stage access to new technologies for nascent and new firms.
5. Implementing favorable government policies by simplifying procedures, adjusting fiscal aspects to encourage business formalization, and reducing tax and bureaucratic burdens can significantly improve the business environment. Additionally, moving away from protectionist policies that bolster the informal economy can increase the competitiveness of the formal sector.
The report was authored by Juan Pablo Escorcia Caballero, Jana Schmutzler, Mariangela López Lambrano, Fernando Pereira Laverde, Fabian Osorio Tinoco, Ana Carolina Martínez Romero, Juan David Soler Libreros, Liyis Gómez Núñez, and León Darío Parra Bernal. Partner institutions include Universidad del Norte, Pontificia Universidad Javeriana de Cali, Universidad Icesi, Institución Universitaria Americana, Universidad EAN.
Access the report (in Spanish) at the following link.