Why are Africa’s banks failing female entrepreneurs?
Five years ago, in 2013, Esenam Nyador became one of Ghana’s first accredited female taxi drivers. Since then her business, Miss Taxi Ghana, has gone from strength to strength. Ms Nyador has positioned Miss Taxi as a ‘female driver chauffeur service’ to great effect; from developing a new list of clients from scratch, to the growth of a social media footprint that includes a Facebook page and Twitter and Instagram accounts. Over the next 12 months, she hopes to expand the number of cars driving under her brand to five, with the help of private investment.
“I first wanted to become a truck driver but the men wouldn’t let me. It was their space. Out of frustration, I decided to take on the taxi industry. But I wasn’t even sure if clients would accept a woman driver,” says Ms Nyador.
Challenging the norm
In many ways Ms Nyador represents a new breed of female entrepreneur across Africa. While it is true that African women have always played an outsized role in supporting their local communities and, by extension, the wider markets in which they live, today a new vanguard of entrepreneurs is beginning to emerge. These new leaders are shaking up the old methods of doing business and rethinking the ways in which African markets, products and services can present themselves to the world.
The data on the rates of African women entrepreneurship is compelling. Research from the Global Entrepreneurship Monitor from 2016/17 indicates that 25.9% of the female sub-Saharan African population is engaged in early-stage entrepreneurial activity. This, in turn, is backed up by data from the 2018 MasterCard Index of Women Entrepreneurship which found that 46.4% of businesses in Ghana, for example, are owned by women, meaning that the country topped the global league table in this metric. Encouragingly, Uganda scooped the third sport with a female business ownership rate of 33.8%.
“African countries have the highest percentage of women entrepreneurs in the world, with countries such as Ghana, Uganda, Botswana and Rwanda leading the way in female entrepreneurial activity,” says Melanie Hawken, chief executive of Lionesses of Africa, a social enterprise working to advance Africa’s women entrepreneurs.
Nevertheless, Ms Hawken notes that much of this entrepreneurial activity is born out of necessity and the “factor-driven” economies in which they operate. In Ghana, for instance, women are the backbone of the country’s agricultural output and contribute to the production of about 70% to 80% of all the food consumed in the country, according to MasterCard.
As the Index of Women Entrepreneurs states: “Women typically turn to necessity-driven entrepreneurial activities out of sheer will to survive and support oneself and family. These activities are often operated in the informal micro- to medium-scale agriculture, manufacturing and services sectors of the economy.”
A new voice
But this necessity-driven dimension of female entrepreneurship is only one, albeit large, aspect of women-led business activity on the continent. “A new generation of women is emerging as high-growth potential entrepreneurs who are building great products, services and brands that are making the world sit up and take notice. What’s changing is that women entrepreneurs on the continent are increasingly finding their voice and take ownership of their own destiny,” says Ms Hawken.
This view is shared across much of Africa. Stories of female entrepreneurs breaking new ground, such as Ms Nyador in Ghana, are commonplace. This is being accompanied by a growing self-confidence and belief among women in their own potential to transform the societies and economies in which they operate.
“Women are more aware of their personal values and are [less inhibited than they once were]. The weight of tradition is weakening. We are no longer afraid to show ourselves. It represents [real progress],” says Azimath Adjassa, chief executive of Sunustartup, a Beninese organisation established to help women develop sustainable business models that operate across west Africa.
This shift is leading to meaningful change across a range of economic sectors and markets. The continent’s chocolate industry, for example, caught the attention of two Ghanaian sisters, Kimberly and Priscilla Addison. Ghana is the world’s second largest producer of cocoa, behind Côte d’Ivoire, while Africa as a whole accounts for about 70% of the world’s total production. Yet, most estimates indicate that only 1% of global chocolate processing occurs in Africa. With the value of global chocolate industry at close to $100bn a year, the Addison sisters saw an opportunity ripe for development in their own country.
With no previous experience in the chocolate industry, the two sisters established their company, 57 Chocolate, to harness Ghana’s cocoa potential and challenge the notion that premium chocolate products can only be developed in Europe. “In Ghana there are just a handful of chocolate producers and we want to change that. We want to prove that good chocolate can be produced in this country,” says Kimberly Addison.
The company’s first batch of chocolate was produced in 2016. But over the next year, the Addison sisters are looking to grow their business by opening up their products for export. To that end, they see themselves within a wider movement that is pushing people to reimagine African products and services in the global marketplace. “Women entrepreneurs are playing a role in rewriting the narrative in terms of the way African products are viewed abroad,” says Priscilla Addison.
The Addison sisters, who grew up in Senegal, Switzerland and the US, are standard bearers for another trend: the growing number of women entrepreneurs who are returning to Africa from diaspora communities. With growth opportunities abundant across the continent’s key markets, many female entrepreneurs are returning to their communities to develop business ideas that were generated overseas.
“We are seeing greater collaboration between women on the continent and the diaspora around the world. Also, more young women who were educated in the US or Europe are returning to start businesses on the continent, bringing with them skills and knowledge of international markets. We see more women entrepreneurs with a keen and vested interest in how their countries and governments are run, leading the anti-corruption fight,” says Ms Hawken.
The finance trap
Though the rise of Africa’s women entrepreneurs counts as one of the most encouraging stories to emerge from the continent in recent times, it is accompanied by severe growing pains. Entrepreneurs of all stripes face difficulties, from generating business know-how to dealing with expensive and time-consuming bureaucratic procedures. But chief among their hurdles is access to finance. For women in Africa, and elsewhere, this challenge is even more salient than it is for men.
“In terms of entrepreneurs, the lack of access to formal financial services is a binding constraint. For women it is an even greater challenge,” says Mayra Buvinic, a senior fellow at the Centre for Global Development.
The formal financial sector – and banks in particular – are largely failing to cater to women entrepreneurs. This failure has many causes; conscious and unconscious biases are playing a part, as are a lack of product and service offerings tailored to the needs of women. Meanwhile, most lenders are unaware that they even have a problem in the first place, since gender disaggregated data is rarely captured. When it is, the results are startling.
For the past 15 years the Chilean government has required banks to capture data on the loan sizes and interest rates offered to men and women. Chile’s SBIF (Superintendencia de Bancos e Instituciones Financieras) published data in 2016 indicating that vast differences in credit terms exist between men and women, covering both consumer and commercial loans. Loan sizes for women were, on average 32% lower than those for men, while their interest rates were roughly 15% higher than their male counterparts. SBIF noted that these figures were an improvement on previous years, thanks to the data being captured by the country’s banks.
“If banks don’t have access to gender segregated data they don’t realise they are missing customers and discriminating against women. Banks are missing out on a business opportunity because [on average] women pay loans back at a higher rate than men. At lot of it is unconscious bias,” says Ms Buvinic.
Similar problems exist in Africa with very few banks taking the issue of female entrepreneurship seriously. “There is always a challenge in getting access to funding, especially for the high growth potential women who are looking to scale or develop export markets and require working capital. Women often have businesses in what are seen as ‘soft’ industries [in what] remains an extremely patriarchal, male-dominated funding universe across Africa,” says Ms Hawken.
Beyond the banks
Ms Nyador, who runs Miss Taxi Ghana, never considered turning to the country’s conventional banks when starting out on her journey. As a recent graduate lacking collateral and documentation but in need of capital to obtain a vehicle to start her taxi business, Ms Nyador instead turned to a company offering hire purchase-style agreements covering the acquisition of vehicles.
“The conventional banks were just not an option. I knew straight away,” says Ms Nyador.
Even as the Miss Taxi Ghana enterprise expands, with the addition of five new branded vehicles expected over the coming 12 months, it has taken an agreement with a private investor to secure this growth. And though Ms Nyador’s efforts have inspired a new cohort of women drivers to seek opportunities in the taxi business, most are held back by a lack of access to capital.
“My ambitions are big in the sense that I want to have Miss Taxi Ghana operating as a social initiative as I want to have many more women taking up driving as a profession. For the past five years, more women have been approaching me but these women don’t have the capital to even get their own vehicles because if they did they could drive under my brand,” says Ms Nyador.
Paying it back
As Ms Nyador’s example illustrates, there are strong business, economic and social arguments to be made for supporting women-led businesses. Not only do women invest the proceeds from their businesses back into their local communities, they are also more likely to repay the loan facilities that are granted to them than men.
Data from the International Finance Corporation makes this overall challenge clear: in sub-Saharan Africa women produce more than 80% of the food for the continent despite only accounting for 50% of the population. Yet, only 12% of agribusiness investments are targeted towards women-owned smallholder farms.
“The paradox is this: Africa has the highest percentage of women entrepreneurs on the planet, but there are few or no tailored products being created for them by the African banks,” says Ms Hawken.
This dearth of bank funding has led the continent’s women entrepreneurs to seek alternative sources of financial support. In the case of the Addison sisters’ 57 Chocolate, private savings helped the company to get off the ground while grants from entrepreneurial support programmes have also assisted.
“Across Africa there are a growing number of business accelerators and foundations that are supporting entrepreneurs. 57 Chocolate has benefited from the Tony Elumelu Foundation Entrepreneurship Programme. Each year this programme selects 1000 entrepreneurs to train, while providing them with a grant of $5000 dollars. That was a big help,” says Kimberly Addison.
But women entrepreneurs in the region are also drawing on traditional support systems to elevate their businesses. In particular, the use of co-operative micro-credit schemes known as ‘tontines’, in which savers pool their resources and take turns in collecting a large prize, have seen wide use across the continent.
“The good news is that thousands of women are starting and running small businesses that are allowing them to survive and take care of their families. And funding often comes from the African female solidarity [schemes] commonly known as tontine. There are also women’s networks, international foundations and associations that raise funds to finance small and medium-sized enterprises through innovation competitions,” says Ms Adjassa from Sunustartup.
Hitting the glass ceiling?
So where do Africa’s women entrepreneurs go from here? For one, their difficulties in accessing finance are but one of many hurdles that must be overcome. Male domination of the business culture in many markets has bred a peerless resilience among the continent’s women-led businesses.
When Esenam Nyador first approached the country’s male-dominated taxi unions, which control the main passenger collection and drop-off points, she was refused membership. To deal with this, Ms Nyador asked only to serve those passengers that drivers in the unions rejected. In doing so, she was able to build a loyal and long-term book of clients from which she built her business. This kind of resourceful, can-do attitude is a mainstay of Africa’s women entrepreneurs. Consequently, most realise that there will be no easy or immediate solution to their funding challenges.
“We don’t believe in silver-bullet solutions. Nobody knows better than the women on the ground what is needed. It would be useful if the multi-laterals and banking groups started listening to them and working with them, instead of running off to create silver-bullet initiatives that deliver very little by way of impact on the ground,” says Ms Hawken.
For a start, gender disaggregated data is needed on the lending practices of African banks. This would likely expose the extent to which women-led businesses are being hit by the various conscious and unconscious biases that have afflicted other markets, including Chile. It would also help banks to tailor their product and service offerings to meet the specific requirements of female entrepreneurs.
On this point, Ms Adjassa agrees: “The financial sector does not value the African woman entrepreneur at fair value. I think we need to spend time to [increase the understanding of female entrepreneurship] and overcome prejudices. A few years ago, I would talk about ambition and self confidence, but women across the continent have evolved. They are more ambitious than ever and deserve financial institutions that believe in them and contribute to the realisation of their dreams.”
A tech answer?
Meanwhile, technology and innovation is playing a growing role in answering many of these challenges. Mobile banking, for instance, is helping to deliver greater privacy and security for women as they manage their personal and business finances. “Mobile technology gives women the privacy and security to make financial transactions that they don’t get through a traditional account. A lot of time they are signed up to joint accounts, so mobile phones encourage economic independence for women,” says Ms Buvinic.
The Centre for Global Development is currently running an effect evaluation study on the impact of mobile devices and business training on women’s economic empowerment in Tanzania and Indonesia. The preliminary results from Tanzania, which draw from a sample of 4000 urban women entrepreneurs, show that 90% of women saved some money over a 12-month period of which 40% was reinvested in their businesses. This result, according to the centre, has contributed to growing evidence that women prefer to save over men.
Accordingly, opening up more formal banking opportunities for women entrepreneurs would have clear benefit to established financial institutions. “It would seem a no-brainer: there’s an incredibly high number of women entrepreneurs; on the whole they are woefully underserved; and, they happen to better at repaying loans than men,” says Ms Hawken.
Until this happens, Africa’s female entrepreneurs will continue as they have been; working hard, pushing the social and economic frontiers of their societies forward and contributing to a more prosperous continent.
“It’s in the blood of a woman to not sit down and be idle,” says Ms Nyador.