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by Dubem Jideonwo
As the world marks the International Women’s Day on March 8, 2016, access to affordable finance for female entrepreneurs and smallholder farmers through the provision of “equal economic opportunity for all” continues to be discussed extensively. This year’s theme, Pledge for Parity, calls on all individuals to join forces to ensure gender parity. It is most relevant as women have long been excluded from formal financial processes and have had to turn to the informal sector (savings schemes and cash transfers) to support unmet financial needs. The roots of this gender gap are multifaceted. Below are initiatives that are promoting gender equality:
Creating a bank account in a formal financial institution is the first and most important step towards achieving financial inclusion. Only 34% of adults in Sub-Saharan Africa hold bank accounts in a formal financial institution, and only 30% of those formal accounts are held by women compared to 39% held by men, according to the World Bank.
In addition, the World Bank’s 2014 Global Findex database on financial inclusion indicates that women in the developing world are 20% less likely than men to have an account at a formal financial institution and 17% less likely to have borrowed formally.
Women and men inclusive face challenges in access financing tools. Oftentimes these challenges are related to insufficient documentation, physical access, cost and financial literacy. However, for women these challenges are oftentimes doubled or tripled. UNESCO’s Institute for Statistics shows that in Sub-Saharan Africa 68% of men are literate in comparison to 51% of women (June 2013). In addition, there is a lack of sufficient legal and regulatory frameworks to promote women’s inclusion in financial processes.
Furthermore, socio-cultural norms constitute a barrier to women’s access to finance. Within some African societies, there are religious or culturally imposed restrictions on women’s roles that limit their successes in agriculture. In Kenya for instance, the constitution grants equal rights to accessing property for men and women. However, certain tribes are exempted from this rule and apply their customary law. As customs prevail over existing statutory laws, women are therefore in these cases restrained from accessing property, as stated in a 2013 African Development Bank publication titled "Financial Inclusion in Africa: Challenges in Economic and Financial Policy Formulation. These limitations are one of most severe barriers because they are deeply rooted in society. Oftentimes, this form of “gender stereotyping” causes lending institutions to perceive women as high-risk candidates, which further widens the gender-related funding gap.
Barriers in land ownership and access to property further hinder women’s economic inclusion. The limited availability of land rights laws that defend women’s right to own property prevents women from owning collateral which then presents a disadvantage in their ability to access loans, credits and insurance to pursue economic opportunities.
In 2014, Goldman Sachs and the International Finance Corporation (IFC) created The Women Entrepreneurs Opportunity Facility (WEOF). The initiative aims to increase access to capital for 10,000 women around the world by working with banks in local markets to expand their lending to women-owned businesses. WEOF recently invested in Chase Bank Kenya, which targets women entrepreneurs through women-only branches and specially designed loan products. IFC estimates that only 7% of women-owned micro, small and medium enterprises (MSMEs) in Kenya have access to formal credit. Recently, Chase Bank Kenya has been able to significantly reduce interest rates paid by women-owned business and is working to grow its portfolio of loans to women entrepreneurs.
In April 2015, the Global Alliance for Women (GBA) with a subset of banks including Diamond Bank Plc of Nigeria, made a commitment to provide financial access to 1.8 million previously unbanked women in Latin America and Africa by 2020. Diamond Bank is targeting Nigeria’s unbanked population of women with a program known as BETA Savings Proposition, which is recognised for targeting the “unbanked and under banked” population. Through the use of mobile sales and service agents, it aims to provide ease of access to banking services. In 2014, only 34% of women had a formal financial account. Since April, more than 250,000 women have opened BETA accounts in Nigeria.
A similar project is underway in Ethiopia. The Women’s Entrepreneurship Development Project (WEDP) is a $50-million investment lending operation that was formed by the World Bank. It aims at at closing the financing gap by increasing the employment and earnings of small and medium enterprise (SMEs) owned or partly owned by female entrepreneurs in Ethiopia. In addition, the project offers an entrepreneurship training program that equips women with necessary business skills. Prior to this project, 76% of current WEDP clientele had never taken a loan before. The average WEDP loan has resulted in a 17% increase in employment of Ethiopian women entrepreneurs and an increase of 24% in annual profits.
In Rwanda, a land tenure initiative promotes land ownership by women. The Rwanda Land Tenure Regularisation Programme funded by the UK Department for International Development (DFID) was created to improve investment, rural growth and secure women’s right. It does this by providing financial support to the Rwandan government to issue registered titles to every landholder and establish systems for maintenance of those titles. It has facilitated joint tilling land and has increased ownership of land by women. The change in investment in such soil conservation structures such as bunds, terraces and check dams was about 10 percentage points among households affected by the programme. The estimated effect of land tenure regularisation on such investment by female-headed households has increased by 19 percentage points. It is double that of male-headed households, as stipulated by the AfDB Gender Strategy 2014-2018: Investing in Gender Equality for Africa’s Transformation.
These and many more similar practices may not be the quick solution to closing the gender gap, but have achieved significant progress worthy of emulation. In order to ensure economic growth for Africa, it is of primary importance that the issue of a gender gap in accessing finance be addressed. More initiatives including those mentioned above should be created accordingly to narrow this gap.
Dubem Jideonwo is currently completing a Master of Public Administration in Development Practice at Columbia University’s School of International and Public Affairs (SIPA) in New York.