A pathway to equality in the financial sector

Credit Bank Limited CEO Betty Korir. [File, Standard]

Entrepreneurship is a proven way of supporting women in vulnerable situations, giving them access to financial freedom and improving their families' economic prospects.

Women-owned small and medium enterprises (SMEs) equally make significant contributions to the economies in which they operate. Unfortunately, most female entrepreneurs continue to face stiff headwinds in realising the economic growth potential of their enterprises.

This is due to a number of barriers which can be attributed to various reasons, including low financial literacy, risk aversion, social and cultural norms, as well as tendency for women-owned SMEs to be smaller in size. Among the key constraints to women SMEs growth in Africa, is access to finance - which is considered to be one of the greatest hurdles.

On average, 30 per cent of female SME owners see their credit application dismissed by formal financial institutions following lack of "suitable collateral" (real estate collateral or cash), and another 25 per cent do not even bother to apply for a loan under the assumption that their request will be met with a firm rejection due to lack of appropriate collateral or from past experiences with unfriendly finance institution(s).

In sub-Saharan Africa, only 37 per cent of women have a bank account, compared with 48 per cent of men, a gap that has only widened recently, according to a World Bank report (2021). The findings reflect a worse situation in North Africa, where the silent majority of the adult population remain unbanked with the gender gap for access to finance standing at 18 percent, the largest globally.

Closer home, research has it that Kenyan women constitute about 52 per cent of the population and about 30 per cent of the registered businesses (so far) are women-owned yet their financial inclusion remains lean. This is mainly because women only hold less than 10 per cent of the registered title deeds in the country, which makes it difficult for women-led SMEs to access higher amounts of credit usually supported by a collateral (secured credit).

These striking figures have consistently posed questions to the policy-makers in Africa. What is it exactly that has continued to fuel gender disparity in access to finance? And why, is the gap growing even wider today; more than a decade ago? Closing the gender inequality gap therefore remains an economic challenge.

In addition to unleashing their economic contribution, women entrepreneurs establish their businesses much faster than men, yet they are held back by the barriers to funding. Fortunately, there is hope for the Kenyan woman entrepreneur.

Financial institutions have the opportunity to make a strong contribution to communities by promoting financial literacy among women engaged in small and medium enterprises. Providing technical support to these women is critical in ensuring they make sound business decisions.

While more deliberate efforts are required to close the gender gap and realize the potential gains of financial inclusion, educating women on how they can formalize their businesses is also crucial to narrowing the gender gap.

- Writer is the CEO of Credit Bank Limited