Lenders’ failure to support Africa’s female entrepreneurs is bad news for the continent’s wider communities.
Funding crises in Africa usually mean troubled government budgets or stalled infrastructure projects. But female entrepreneurs across the continent are in the midst of their own financing crunch. Few can gain access to the funds that are needed to support the growth of their businesses at a time when high-potential, female-led enterprises are emerging in greater numbers than ever before. For Africa, this mainly untold story is a hidden brake on the region’s long-term growth opportunities. The evidence for this is clear: female business owners invest more back into their local communities through support for schools, housing and social projects than their male counterparts.
Blame for this situation can be laid squarely at the door of the continent’s leading financial institutions. But the reasons for this failure are complex. For one, most financial institutions are unaware that a problem exists in the first place. Gender disaggregated data is rarely captured by banks, for example, even in most developed markets. When this information is made available, the outcomes are alarming. Chilean banks have looked at the different loan sizes and interest rates offered to men and women over the past 14 years and discovered that women are offered smaller loan sizes with higher interest rates than men.
This is important because the business case for banking women is also clear: women are far more likely to repay their loans than men. So not only are women better bank customers, but they also re-invest their business proceeds into the communities in which they live and work. This should be a ‘no-brainer’ for Africa’s lenders. Moving forward, the continent’s financial community must start to develop products, services and offerings that cater to the needs of female entrepreneurs. Banks also need to track the ways in which they engage with men and women to shine a spotlight on bias, both conscious and unconscious.
Until then, Africa’s women will have to rely on the ingenuity and resilience that has brought them this far already, not least the use of microcredit savings schemes.
