Partial credit guarantees work | Nation

Throughout African civilisation, women have been key to the continent’s development and growth. They grow most of our food, run many small and medium-sized enterprises (SMEs) that create employment and invest 90 per cent of their earnings in the community.

But despite their power and potential, restrictive social norms, discriminatory laws, jobs, education and unfavourable lending have created a wealth gap across the socioeconomic divide.

Lately, organisations have put in place initiatives to recognise women’s rights as well as their potential to secure the continent’s collective well-being and sustainability.

These have ranged from investments in access to clean water, education and health; to skills development, entrepreneurship, finance and markets. Thus, the number of women in Africa who are more economically enabled has increased. About 42 per cent of SMEs are headed by women, up from about 12 per cent in 2008.

Unfortunately, some historical issues that drive gender inequality and economic marginalisation amongst African women persist. Emerging and evolving barriers to empowerment such as the Covid-19 pandemic, climate change, gender pay gaps and limited access to technology perpetuate their economic marginalisation. 

According to UN Women, it will not be possible to meet the 2030 women economic empowerment Sustainable Development Goal (SDG) unless member countries work to enhance economic inclusivity and empowerment for African women.

Access to income and assets, control of economic gains and the power to make decisions are key to women’s economic empowerment. These themes link to financial inclusion. According to the World Bank, technology is a major driving force whether by a traditional bank or a fintech has a vital role in encouraging financial inclusion as it helps to remove critical barriers in the transaction process on the individual and organisational levels.

For most African women, entrepreneurship is the most feasible way to earn a living. However, securing financing to start and own a business remains a major barrier for women. Small and medium-sized enterprises (SMEs), especially women-owned ones in their growth stage, reach the point where personal resources do not meet their needs.

Yet the lack of access to finance and financial services, such as credit, is repeatedly identified as a significant barrier to entrepreneurship for women in Africa because they lack collateral or control over assets required by banks for them to be eligible for commercial loans. 

An article by IFC says 30 per cent of SME owners in Sub-Saharan Africa see their credit application rejected by formal financial institutions due to lack of “suitable collateral” (real estate collateral or cash) and another 25 per cent do not even bother to borrow, believing their request will be thus rejected. It is, therefore, critical to expanding access to credit to women-owned enterprises as they seek working capital and funding for investment projects.

Women’s expanded access to credit can achieved through credit guarantee schemes. They guarantee credit extended by lenders to finance eligible borrowers. Government credit guarantees are the most common. An increasing number of not-for-profit organisations are also guaranteeing lenders of small and growing businesses.

An example of such organisations is Shared Interest, a New York-based non-profit legal entity established in 1994 that acts as a guarantor for woman- and black-owned small and growing businesses in Southern Africa, unlocking local capital and promoting private sector development by expanding access to credit.

The low access to information is a threat to the utilisation of guaranteed loans and hinders the financial inclusion of women and their overall women empowerment in the era of globalisation. To improve their rights, personal productivity, access to credit, business performance and contribution to economic development, women need participation in technological advancements that are expanding opportunities for many to join the global economy.

Investing in the digital inclusion of women can ensure that more woman-owned enterprises are resilient, aware and eligible for loans. Digital inclusion enables woman-owned businesses to operate more effectively and transparently.

For example, they can adopt tailored and affordable payment platforms that streamline payment processes connects them to online training and development resources for improving their skills and, exposes them to other ideas and markets, industry experts and, additional potential business partners.

More women can also participate more equitably in the global economy through due to digitally enabled transparency in business transactions.

Let’s develop and refocus preventive policies and programmes to maximise women potential and make it possible for organisations to benefit from the diverse resources that women bring to the table.