It's less risky to lend women, so why do men get more loans?

When former Lamu County Woma Rep Shakila Abdalla presided over a fundsdrive in support of various women groups. [File, Standard] 

Kenyans had borrowed Sh30.8 billion from the Hustler Fund as of June 15, indicating the need for credit in the economy; a gap that is now being filled by President William Ruto’s administration. 

Other than the immense borrowing over a short period, the fund launched in November 2022, had accumulated Sh1.5 billion as mandatory savings. Further, Sh17 million had been saved voluntarily, according to the National Treasury Cabinet Secretary Njuguna Ndung'u during the reading of the budget for the financial year 2023/2024.

These statistics highlight the existing gaps and the need for inclusive development to expand opportunities for low-income households, especially women. It can help in reducing poverty while driving the country’s overall economic growth.

The need for financial inclusivity remains even now more desirable after a pandemic that reduced incomes for medium, small and micro enterprises (MSMEs) and women in the informal sector.

Most notably, women across all social grades have pointed out having challenges getting financial support to grow their businesses.

According to the 'Top 100 Most Loved Brands' study released in March 2023, an average of 24.1 per cent of women in Kenya run their own businesses full time. However, 11.7 per cent of them said they faced challenges getting financial support to grow their businesses. This is worse for women who are semi-skilled and unskilled manual workers at 18.1 per cent.

The findings are reinforced by a report by the International Centre for Research on Women (ICRW) showing that women living and working in informal areas in Kenya and Uganda were disproportionately affected by restrictions during the pandemic. It revealed that the design and rollout of Covid-19 economic recovery and social protection policy responses did not directly target workers in the informal sector. 

The ICRW’s Study found that Informal Women Workers primarily reached out to their informal networks when they sought to understand the source of borrowing. Only six per cent borrowed from formal institutions, revealing a glaring absence of linkage of these groups to the formal banking system.

Despite Kenya’s thriving access to the formal banking system, reports show women still lack familiarity and involvement with formal financial systems. They continue to face barriers to accessing financial services.

This is despite women being less risky borrowers compared to men, who have more access to formal credit. According to FinAccess MSE Tracker Survey March 2023 by Central Bank of Kenya and FSD Kenya, the proportion of men defaulters was 3.5 per cent in commercial banks compared to 1.5 per cent for women.

In saccos, women defaulters were 1.7 per cent compared to men who are 2.4 per cent. In digital loan products, women defaulters were 16.4 per cent compared to 23.6 per cent of men. In mobile overdraft service, Fuliza, 14.6 per cent of women were defaulters compared to 19.6 per cent of men defaulters.

Policymakers should eliminate biases to financial inclusivity as majority of the barriers are due to systemic barriers driven by policies, practices and resource allocation. 

Ms Muraya is founder and CEO of BSD Group

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