Address three obstacles for women entrepreneurs to access financing
Elfreda K. Sheriff is the CEO of KilSah Consulting, a development company providing research, policy advisory, training and mentoring services to micro, small and medium-sized businesses. She promotes women’s empowerment through entrepreneurship. She enlightens us about the entrepreneurship that she analyzes through this article.
Her vision:
Entrepreneurship is growing and making waves in the business and corporate landscape around the world. The number of women running their own businesses is increasing globally, whether in the United States, where women opened the most businesses in 2023, or in Africa, where the highest proportion of women entrepreneurs reside, or in Asia, where the number of women entrepreneurs represent 9.8% of the total population of ASEAN (Association of Southeast Asian Nations).
Access to finance is a major constraint for women-led businesses to operate and grow their businesses; Therefore, increasing access to financing for women-owned businesses is critical to their success and growth.
This year’s International Women’s Day theme is «Investing in Women: Accelerating Progress»
To ‘accelerate progress’ and increase financing for women entrepreneurs, stakeholders must address those obstacles that may seem trivial, but are not. When investors and financial institutions invest in women-owned businesses, they can accelerate gender equality.
There is a very high lack of credit for entrepreneurial women on a global scale.
The global credit gap for women-owned businesses is estimated at $15 trillion. Women entrepreneurs face systemic barriers that their male counterparts do not.
In many countries, there are legal barriers to women’s entrepreneurship.
Aspects that she highlights among the important ones are:
– Including legal barriers that prohibit women from signing contracts and opening bank accounts.
– Cultural and social prejudices.
– Limited time and skills.
The difficulties of reaching equality in 2030
Gender equality is a necessary foundation for a prosperous and sustainable world, but the world is not on track to achieve gender equality by 2030.
Increasing women entrepreneurs’ access to financing by addressing some of the barriers that prevent them from accessing necessary financing can help promote gender equality in the area of women-led businesses.
Lack of financing is a common limitation for women
This comes up when talking to women-owned businesses about their growth.
Still, when asked about the financing currently available and why they don’t apply for financing programs or contact banks for loans, the common answers they give are:
– They do not know.
– They don’t think they would approve.
– They don’t know the right people.
– Which have cumbersome and time-consuming application processes.
So, although funding programs exist, these limiting factors still affect women who apply for and obtain funding.
Addressing the barriers that prevent women entrepreneurs from accessing available financing is now even more critical than ever, not only for current but future women entrepreneurs as well.
A study indicates that more women are planning or starting businesses.
So what are the subtle obstacles that prevent women-led businesses from accessing funds to grow their businesses?
You are not aware of the financing programs.
Anne K. is a young entrepreneur living in Kampala, Uganda, who dreams of starting a hair care shampoo and conditioner line. She currently collects used plastic bottles and sells them to an organization. She needs funding to start her small-scale business, but she doesn’t know what is available or if there is anything available for someone like her. She is also unbanked. For now, her dream of starting a business remains just a dream.
Women also manage their homes
Someone might say, well, it’s the responsibility of women entrepreneurs to know the programs available to them.
But it is important to understand that women also manage their homes; Sometimes, there is little time to do everything. Women do more unpaid care and domestic work, which limits their time.
Research by CARE International revealed that expectations for women to be primary caregivers are stronger than ever
When a woman takes care of the home and runs a business, the home front can tip the balance in her favor, stealing attention from the company. There is not much time to spend searching for available financing options.
As the World Economic Forum suggests, women need solutions to meet them where they are by creating women-centered designs that solve real problems.
Excluded women in developing countries
Additionally, the World Bank notes that women in developing countries are excluded from formal banking due to their need for more official forms of identification, access to mobile devices, and informal and formal rules and structures that limit their financial capacity and capabilities.
Not included in networks
Omotayo A., an agricultural entrepreneur in Lagos, Nigeria, learned about a financing program for women-led businesses. She participated in the training associated with the program, but needed to qualify for funding.
She said another entrepreneur from the same program who knew someone within the organization managed to get the funds approved, unlike her, who didn’t know anyone. Omotayo began working to get the grid connection needed to access the funds needed to expand her agribusiness. She couldn’t get the financing.
The saying «it’s not what you know, it’s WHO you know»
She plays an important role in women-owned businesses accessing the funds they need. In addition to not knowing about financing programs, not knowing the «right people» can also inhibit access to financing.
Lack of access to networks impacts women entrepreneurs and is increasingly recognized as an essential way to empower them and address inequalities.
Access to networks can lead to valuable collaborations and partnerships that can help women entrepreneurs connect with the right people in the right industry and learn about programs available to them.
Not big enough to invest
Patricia W., an interior designer, runs her business from home in Atlanta, GA. She works alone and has found it difficult to access loans through her bank to help grow her business.
Her credit and asset requirements limit the amount of loan she can receive. The bank representative has informed her that her business is small.
According to Global Entrepreneurship Monitor, women are more likely than men to start a business without employees
The report notes that women are «much less likely» to start a business with more than 20 employees and are more inclined to start a business with zero to 19 employees.
In India, another Bain & Co study showed that women-owned businesses are mostly run by sole proprietors.
Furthermore, 30% of women worldwide are self-employed in the informal sector. The World Bank notes that 63% of women-owned businesses in Africa tend to be household and small-scale businesses.
In the United Kingdom, a business venture study found that women run almost 40% of microbusinesses, up from 32% the previous year.
The size of a company directly influences the financial options available
The access that larger companies have to financing is different from that of smaller companies. Research shows that women are more likely than men to be solopreneurs and run smaller businesses, which can impact their ability to access finance.
Large businesses have more access to traditional bank loans than smaller businesses due to their size and other reasons such as assets, a longer history, and a more established reputation.
Conclusion
Accelerating gender equality by increasing women entrepreneurs’ access to finance is critical to reducing poverty and fostering economic growth.
According to the World Economic Forum, prioritizing women’s financial needs could help add $10 trillion to the global economy by 2030.
There is a financial incentive to address and remove barriers for women to access funds and grow their businesses. To help close the financing gap, stakeholders must become aware of the subtle barriers that prevent available financing from reaching women entrepreneurs.
By addressing these obstacles, more women:
– will become aware of the financing options available.
– will be accepted in networks that provide them access.
– They will feel comfortable with the size of their businesses, while at the same time being bold and confident when approaching investors or financial institutions.
Women’s financing involves much more than simply access to funds
Investors, financial institutions, mentors and stakeholders need to meet women wherever they are.
Women-led companies are asking for a chance. At Kilsah Consulting, for example, the annual grant primarily funds women-owned microbusinesses.
The application process for these grants takes into account the limited time available to women entrepreneurs.
The application and warranty forms are structured to eliminate unnecessary questions. This was to ensure that the requirements and application process were less burdensome for women, which increased the number of female applicants.
Receive support and grow companies
When women are supported and empowered to overcome these subtle obstacles, they can build and grow their businesses, create jobs and reduce poverty.
Take advantage of a real opportunity in women-led companies. Maybe she’s too small, maybe she’s not part of a particular network or circle (invite her), and maybe she doesn’t come recommended by a close friend. Still, if we support women entrepreneurs, invest in them, and together we can accelerate progress.
Provide feedback to your network about your investment decisions and design processes by raising awareness about financing programs. Investing in women is worth it!
How microcredit for women can address the gender gap and help alleviate global poverty
Patience, a DFS+ agent helping women entrepreneurs in Northern Ghana access funds. We must take into account what DFS (Digital Financial Services) means, that is, an agent or official of Digital Financial Services.
Patience as a DFS+ agent helps women entrepreneurs in Pwalugu, a small community located in the Upper East region of Ghana, access funds.
This information has been prepared by Zubaida Bai, President and CEO, Grameen Foundation and by Gigi Gatti, Senior Director of Program Strategy and Learning, Grameen Foundation
Patriarchal policies, intractable risk formulas and high interest rates of many financial service providers limit women entrepreneurs’ access to credit.
Holistic solutions that dismantle gender biases will resurrect the original intent of microcredit and accelerate our global race toward gender parity.
This is how microcredit can enable financial service providers to create win-win scenarios for their organizations and women entrepreneurs.
In 1983, Professor Muhammad Yunus founded the Grameen Bank
With the belief that microcredit (very small loans offered to low-income groups of women) offered a path to lift women out of poverty.
Thirty years later, the microcredit industry had exploded and reached 211 million clients. By 2020, the global microfinance market was estimated at $156.7 billion and was projected to grow to $304.3 billion by 2026.
However, the spirit of microcredit was largely lost as many financial institutions pursued patriarchal policies, intractable risk formulas, and interest rates that could rise above 100%.
These practices prevent poor women entrepreneurs and smallholder farmers from obtaining affordable capital to grow and sustain their businesses or, worse, trap them in cycles of debt.
One billion women around the world remain unbanked
Meanwhile, one billion women around the world remain outside the financial system and often lack access to even a simple savings account.
These women are also trapped:
– unable to save or invest.
– often beholden to men for access to the cash that exists.
In any case, the inherent economic power of women to drive equitable and sustainable development remains untapped.
The World Economic Forum predicts that it will take 131 years to achieve global gender equality
But the world’s poor cannot wait that long. We can shorten that timeline by implementing holistic approaches to remove the structural barriers that women and girls face, and resurrect the spirit of microcredit, which was never about loans but rather about supporting women to reap the benefits of their own. capabilities.
This is why, instead of bemoaning the prohibitive practices and exorbitant interest rates of many financial service providers (FSPs), development partners should work with FSPs to create opportunities that benefit financial organizations. and low-income clients, especially women.
Institutional reforms that move capital to women more quickly and at lower cost can generate gains for both parties and shorten the timeline for gender parity by decades, if not more.
Dismantling gender bias in financial systems
While the Grameen Foundation was originally inspired by Professor Yunus to take its anti-poverty model globally, over time we learned that loans alone are not the answer.
To further the professor’s original intent, we focus on designing holistic solutions that dismantle gender bias in financial and agricultural systems, where women play a crucial but largely invisible role.
Creating effective partnerships with financial service providers (FSPs) that serve low-income women is key to success
However, doing so requires more than a declaration of intent. A comprehensive approach is needed: working with FSPs, households, communities and, of course, the women themselves.
Key components of this work include:
- Engage and empower men to change gender-biased mindsets.
- Create lower-cost loan funds to catalyze increased lending to women entrepreneurs.
- Help women create financial identities, i
