Women And The Economy

6 Min Read

Melinda Gates recently said “women are the shock absorber of families and an economy that defies logic”. This is certainly true particularly in Sub-Saharan Africa where female entrepreneurship is on the rise and this trend shows no sign of slowing down as the growth of women owned businesses exceeds the average in other parts of the world.

As the cost of living increases in most urban settings in Africa, the need for women to have an extra income and take charge of their own schedules has pushed many to create their own enterprises.

A growing number of women are now proprietors of small businesses with at least 41% receiving financial support from family members and only 2%  from financial institutions to start their businesses.

One of the biggest challenges women face in starting and growing their businesses is access to capital.  Institutional lenders are still reluctant to offer loans to women.

The low expectations of a woman’s capabilities is ever present, but this is something that women who have been able to “shatter the glass ceiling in business” are working to address through mentorship programmes and lobbying governments to change their policies.

The fact that stereotypes dictate what is expected of women is something most women in business have to contend with and keeps many others from participating in development processes. According to Forbes magazine, as many as 85% of micro and medium sized enterprises suffer from access to credit and this limits their prospects of growth.

The International Monetary Fund recently released the findings of a study which indicated that policies aimed at reducing discrimination help boost participation of women and guaranteed equality between sexes in areas such as personal finance management and employment opportunities.

Some of the challenges that entrepreneurs face include government bureaucracy when it comes to the registration of businesses. The registration of businesses is a major hurdle. The cost of registration in Africa remains considerably high in absolute terms compared to countries with GDP per capita many times those of African countries.

The fact that most people are not able to formalise their businesses through company registration means that they are stuck in the informal sector and less likely to obtain finance in a formal way from financial institutions. The low levels of literacy particularly among women make it even more difficult to navigate these challenges and prevent many individuals from getting their business ideas off the ground.

Women in rural areas are significantly underserved by the financial system and face greater barriers than those in urban areas. Many are unable to make sufficient profit from their businesses and this makes it even more difficult for them to meet the criteria needed to take out loans.

Despite these challenges African female entrepreneurs such as Kate Woska an entrepreneurial bank analyst, are emerging to change things by identifying issues affecting access to finance for a segment of the population, mostly women who are underserved.

Woska the founder of Atikus Insurance, which provides credit insurance carried out research that led her to discover that financial institutions in Africa mostly lend to male property owners over the age of 35. It is for this reason that Kate Woska founded this social enterprise to address the inadequacies that exist.

More practical solutions are needed to make access to finance through digital innovations on a mass scale. According to Women’s World Banking, there are currently experiments being carried out through data  gathering and research to determine how financial inclusion of women and their user experience, can be improved to help empower them economically.

Even though a good number of private equity firms are now making it possible to leverage significantly large loans for emerging entrepreneurs, the providers of startup capital predominantly continue to be microfinance institutions, social enterprises and philanthropic groups.

Without adequate access to financial services as well as other means of institutional support to grow and sustain businesses, the contributions of women to economic development will continue to be inhibited. Despite tremendous growth in Africa over the past few years, a recent report by UN Women revealed that benefits of growth have been uneven.

The report titled “Transforming Economies, Realising Rights” highlights the need for women to have joint title to land which would no doubt, enable them to have access to finance under the current stringent collateral criteria required by most financial institutions.

Because small and medium sized businesses are the engines that drive growth in most economies in the world, with a substantial workforce of up to 80%, it is imperative that both business and government leaders make an effort to review the policies of their institutions to allow for more inclusion and break the barriers that prevent women from accessing vital services such as finance. There is no doubt that positive synergies exist between investing in women and the benefits that can be reaped economically.

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