Demand from Women as Customers & No Incentives for Bank Lending?
Women Customers Yet No Incentives for Bank to Lend?
Africa's women mean business – but they need finance: Banks need a new approach to African women entrepreneurs, whose inability to raise funds holds back growth
Inclusion was the big theme of the African Development Bank annual meeting in Lisbon June 6 -9, 2011, an acknowledgement that impressive economic growth numbers don't tell the whole story.
As the president of the AfDB, Donald Kaberuka, acknowledged at the start of proceedings, the bank had got it wrong in Tunisia and Egypt – although as one bank official pointed out, good things had been accomplished in Tunisia by President Zine al-Abidine Ben Ali in terms of infrastructure and education, but less so on unemployment.
As inclusion was very much the flavour of the day, one of the "not to miss" sessions covered the subject of African women in business. As an indication of the session's importance, Graça Machel, the former Mozambican education minister and women's rights advocate, and Nelson Mandela's wife, had been invited but had to cancel her appearance because of a funeral.
What leapt out from the session was the untapped potential of women entrepreneurs. A study from the bank estimated that the demand for finance from women entrepreneurs amounted to $19bn (£11.6bn).
As panellists at the session pointed out, this represented a huge missed opportunity – for financial institutions that stood to make money, and for African economies missing out on job creation from dynamic small and medium-sized enterprises.
"This is a $19bn business opportunity for financial institutions, that really is the crux," said Nomsa Daniels, executive director of New Faces, New Voices, a women's business group in South Africa founded by Machel.
Caleb Fundanga, governor of Zambia's central bank, went so far as to say that growth had been held back by the inability of women entrepreneurs to obtain financing. "Growth has been retarded," he said, urging the banking sector to give equal access to women to a general pool of funds. He also made the point that often women were a better credit risk than men as they did not spend their money on drink.
Alex Gitari, chief executive of the Eastern and Southern African Trade and Development Bank, agreed that "women are better borrowers and banks cannot forget this important segment of the market".
Yet women entrepreneurs are woefully underserved. Even in countries reporting an increase ranging from 10% to 30% over the last decade in the number of women-run enterprises (such as South Africa, Zambia, Egypt, Ghana, Ivory Coast, Nigeria and Ethiopia), these firms receive on average less than 10% of all capital invested. In Uganda, women own about 40% of businesses with registered premises but only receive about 9% of commercial credit.
It's because women entrepreneurs face a number of specific hurdles. The most glaring one is that in many African countries, including Kenya, Namibia and Uganda, differences in land tenure rights between men and women have historically left women disadvantaged, with less access to credit and markets. Women's access and rights to land and property depends on their relationship to male family members – as a wife, daughter, sister or mother. According to customary law in patrilineal communities, a widow will only inherit her husband's property if there are no male heirs. Widowhood, divorce, or desertion makes women particularly vulnerable.
Starting a business can also be difficult for women. In Cameroon, for example, although a woman is now legally allowed to start a business without her husband's consent, a husband may still formally object to his wife's exercise of a trade or profession if he judges it is not in the interest of their marriage or children. In Swaziland, women are not allowed to register property and they need a male guardian's consent to open a bank account or start a business. In the Democratic Republic of the Congo the law requires a woman to physically take her husband with her to register a business.
In some cases, the problems can be overcome by a man agreeing to sign on the dotted line. And some banks provide loans by accepting jewellery, for example, as collateral. But discriminatory property rights clearly are a big hurdle.
Lack of confidence is cited as another problem. Here, Evelyn Oputu, CEO of Nigeria's Bank of Industry, said one way of overcoming this problem was to have bank sections that catered specifically for women.
The AfDB is trying to alleviate the problem with a national loan guarantee scheme specifically aimed at increasing women's access to finance under the growth-oriented women entrepreneurs (Gowe) programme. If, for example, a woman entrepreneur wants to borrow $10,000, the scheme asks her to put up $2,000 and guarantees half of the remaining amount. The scheme works through local banks, and choosing the right banks is key, says Line Picard, principal investment officer of the AfDB's private sector and microfinance department.
Picard said an initial flaw in the programme was that minimum loans were set too high, at $20,000, hence the decision to bring the minimum down to $10,000. "We want to scale up the programme throughout Africa," said Picard, who says the AfDB's main aim is to build the capacity of local banks to lend to women. "Banks have seen a lot of demand. In Kenya, banks are receiving 1,000 requests a month."
"We have to choose the banks carefully," said Picard, "and we have to monitor them on a monthly and weekly basis, as they have no incentive to make these loans."