I recently returned to my village in Bungoma County in western Kenya. I came to speak to the community, particularly women and girls, about how they can succeed as entrepreneurs and start or grow small businesses. I remember having similar ambitions earlier in my life. It was only with my father’s support (and thanks to his work as a government-funded news reporter for the Kenya Broadcasting Corporation) that I was able to afford high school tuition and eventually pursue my dream of a career in finance.
However, my experience was the exception.
That day, as I looked out into a crowd of hopeful faces full of expectations in these difficult times, I saw former classmates trying to overcome difficult economic circumstances without access to financial resources. Some of them had been forced into marriage at the age of nine. For these women, economic survival is a daily challenge and the only way to remain valued and relevant in society.
Obstacles to self-employment
In my community and across the African continent, entrepreneurship offers most women the greatest hope of opportunity and stability in the face of a lack of employment opportunities, particularly for their gender. A quarter of all African women are now entrepreneurs, making them a powerful force for economic growth and social change. But these women face significant barriers to accessing the capital they need to start and grow their businesses: only a fraction of the capital available on the continent is granted to women.
At a time when Africa’s economic growth is failing to keep pace with population growth, improving women’s access to capital has the potential to enable women to achieve their dreams and reap incredible benefits for families, communities and the economy as a whole.
Investing in women and their businesses benefits us all, but a number of barriers currently prevent African women from achieving broader economic benefits. Women entrepreneurs are smart and resourceful, but many have never received financial literacy training and are therefore unable to formalise their business plans and manage their accounting. In Kenya and across the continent, women entrepreneurs typically do not have business books or collateral such as land or other real estate that banks require to borrow or receive credit. To make matters worse, there are currently no policies that differentiate the treatment of small, informal microfinance institutions compared to large banks. These small lenders are considered high-risk due to their lack of formal structures, resulting in significantly higher costs to serve them. This, in turn, discourages those with lower incomes or less available capital from lending – which particularly affects women.
There is currently a $1.7 trillion gap between the amount of capital women worldwide want and the amount they receive. Closing this gap could ultimately increase global GDP by as much as $6 trillion, with benefits at every level of society. Women are more likely than men to invest their income in their families, setting the stage for better education and healthcare for generations to come. The growth of their businesses can boost local economies by driving demand for goods and services and creating jobs for other women and men. And successful women entrepreneurs set the stage for a more resilient landscape by bringing diverse perspectives to historically male-dominated industries.
Small loans, big impact
Business, government and charitable leaders are increasingly focusing on developing new tools and resources to help women access capital, and the first results are exciting. Take, for example, the story of Mary, an entrepreneur from Mombasa who runs a second-hand clothing and bag business.
Mary applied for a loan of 20,000 Kenyan shillings (KSh), or about US$150, from KCB Bank Kenya, where I was then a branch manager. Although it was a small loan application that most large financial institutions would have rejected, we ultimately agreed that our bank would play an important role in supporting small business owners without collateral. Mary and other entrepreneurs like her inspired us to launch a new offering specifically for women-owned and -founded enterprises (FLMEs). Today, we offer flexible credit solutions and lend to over 600,000 of these customers, many of whom have no collateral and have had little access to traditional banking services.
In the months after receiving her loan, Mary was able to purchase larger quantities of second-hand clothing, gaining access to higher quality bales from Kenya, Tanzania and Uganda that she could resell at a higher margin. This earned her KSh30,000 or $225 more in profit than her original loan and enabled her to open a store and hire three permanent staff and two temporary workers. By hiring these new team members, she was able to maintain daily operations while continuing to drive her business growth.
Unlock access to capital
To date, KCB Bank has provided the equivalent of US$1.9 billion to support FLME clients like Mary. With funding from the Bill & Melinda Gates Foundation and the European Investment Bank, our FLME division is now also managing a €30 million program in Kenya to improve access to microfinance, with a requirement that 80% of final beneficiaries be women. Programs like these underscore the enormous opportunity for different types of organizations to work together to improve access to capital.
To maximize the economic benefits of these programs, we must also expand educational resources for women entrepreneurs in Africa to help them develop critical financial skills and master dealings with financial institutions. In 2009, our bank began hosting financial literacy workshops with this goal in mind. I have had the privilege of attending some of these workshops and seeing firsthand how quickly women learn these skills and gain new confidence.
This enthusiasm is contagious. The workshops have grown exponentially as female entrepreneurs invite each other – even their competitors – to participate. We could all learn something from these women who implicitly understand that mutual investment is the best path to mutual success.
As a businesswoman in Kenya, I know that to run a successful business venture, you have to take certain risks. The entrepreneurs from my home village know this too. If we do not invest in the economic potential of these women, it is a much greater risk to our economy than the alternative.
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