AfDB, AGF solicit increased financing access for women entrepreneurs

The African Development Bank (AfDB) and the African Guarantee Fund (AGF) have stressed the need to close the finance access gap for women-led businesses to increase their contributions to the country’s economic growth.

They made the call at the opening of the African Development Bank’s Affirmative Finance Action for Women in Africa (AFAWA) Finance Series, on Tuesday, in Lagos.

The event, which is the fifth edition, follows the AFAWA Finance Series held in Tanzania, the Democratic Republic of the Congo, Ghana, and Angola.

Mr Lamin Barrrow, Director-General, Nigeria Country Development, AfDB, said that the bank’s goal is to mobilise $5 billion in financing for African women businesses by 2026.

According to him, AFAWA seeks to increase women’s access to finance in the continent by closing the $42 billion financing gap for women-led small and medium scale enterprises.

“Since the initiative was launched over two years ago, commitments and financing have been secured to the tune of $1.2 billion for on-lending to women-led enterprises in 32 countries across Africa.

“The bank recognises the Nigerian government’s efforts to promote financial inclusion for women, especially through policies and programmes aimed at increasing access to financial services and enhancing financial literacy,” he said.

He, however, said that despite the progress made, the gender financing gap remained huge with women having a disproportionate access to finance services.

“Women are key stakeholders in Africa’s economic integration processes and as such we must support such programmes that expand their true potential.

“Women-led businesses typically have small and medium, and they are largely informal and face the challenge of accessing finance and growing their capacity.

“We believe that the services available through the AFAWA initiative provide a robust platform to inform key stakeholders in government, finance institutions, private sector, and civil society about AFAWA’s innovative benefits for increased lending for women.

Access to finance

Barrow said that the bank is supporting the private sector to access finance through the risk sharing mechanism and classic financing instruments.

“For instance, in 2021, the bank signed a $250 million portfolio credit guarantee with the African Guarantee Fund (AGF) to incentivise financial institutions to increase their lending to women.

“Also, in November 2022, the bank signed a loan agreement with the First City Monument Bank for a $50 million line of credit to support access to finance to SMEs and women enterprises.

“This line of credit is poised to expand lending activities with 30 per cent of the amount set aside for women-led businesses,” he said.

Women are key stakeholders in Africa’s economic integration processes and as such we must support such programmes that expand their true potential.

The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, said that women’s economic empowerment encompassed various aspects from access to education, healthcare to employment opportunities.

Edun was represented by Mrs Grace Ogbonna, Director, Economic Research and Policy Management in the ministry.

He said that the Federal Government was working to ensure that every girl child and woman had the opportunity to receive an education to equip them with the skills and knowledge needed to compete in the modern economy.

“This includes initiatives to eliminate gender-based disparities in education and financing safe school projects for the protection of education from attacks for national development.

“Providing women with equal opportunities in the labour market, our policies aim to create a work environment that supports women’s advancement. We have to introduce legislation to promote paid equity and combat workplace discrimination.

“Financial inclusion is a critical aspect of women’s economic empowerment; the government is therefore committed to expanding access to financial services particularly for women in underserved areas,” he said.

Mr Jules Ngankam, Group Chief Executive Officer, African Guarantee Fund (AGF), said that 70 per cent of women in Africa were excluded financially in the areas of access to credit, financial services, land ownership, job opportunities, leadership positions and wealth creation.

He said: “Our aim is to close the SME financing gap in Africa by addressing the skills gap and providing training for SMEs to understand the requirements for getting loans.

“There is also a huge collateral gap since most of the SMEs in Africa are just starting and might not have collateral when seeking loans.

“This is why AGF is standing as the guarantee to replace the collateral the SMEs are supposed to provide to the financial institutions.”

Information gap

Ngankam noted that there is also an information gap as most of the financial institutions did not have enough information, they needed to carry out a proper product risk assessment for these businesses.

“Also, SMEs do not have proper bookkeeping culture, so through our technical assistance and capacity development, they are able to present the financial statement they need to apply for loans.

“Many people also think women-led businesses are risky, but it is not the case as we have observed. So, we want to work with the financial institutions to reduce the gap between perceived risk and the real risk,” he said.

According to him, the AGF covers 75 per cent of risk under the AFAWA initiative, while the banks are only exposed to 25 per cent risk if they give loans to an SME owned or led by women.

“This is to encourage the banks to lend more to women,” Ngankam added.

Dr Beth Dunford, Vice President for Agriculture, Human and Social Development, AfDB, said that financial systems were impeding the growth of women entrepreneurs because of the perceived risk on women businesses.

This perceived risk, she said, was due to the challenge that women-led businesses faced in terms of collateral.

She said that the bank was adopting a dual-pronged approach to work with governments and financial institutions on how to improve access to finance services for women entrepreneurs.

“Our goal is to change mindsets to help banks and the financial community see women SMEs as customers and bankable.

“We are starting with the financial institutions to ensure that they have financial products that are appropriate for women businesses and their different needs and challenges.

“With the right support, they have the potential to accelerate the country’s progress towards its economic development goals,” Dunford added.

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