Africa: Banks take a new interest in women
About half of all African enterprises are owned by women
“We are not waiting. We are moving,” says Pilda Modjadji, a founding member of the Pankop Women Farmers Forum in Mpumalanga, South Africa. “We mean business.”
The Pankop group, which now has 300 members, started with the humble goal of growing fruit collectively and using the proceeds to supplement family diets, raise incomes and pay school tuition fees. But the women quickly realized that the village offered few job prospects for graduates — their children were going off to the cities. Determined to create an alternative source of employment in the village, the women, with the agreement and support of traditional chiefs and municipal authorities, set up a fruit and vegetable dehydration plant.
The women’s plans were ambitious, and they felt that old-style microcredit loans — which usually range between $20 and $300 — were not enough. The Pankop group needed the equivalent of $100,000. They got the funds from local commercial banks because Thembani International Guarantee Fund, a South African organization created in 1996 by the US non-profit Shared Interest and the Swiss-based Recherches et Applications de Financements Alternatifs au Développement (RAFAD), put up $70,000 in loan guarantees.
With that first loan, the women in Mpumalanga converted an old school dormitory into a functioning plant. The project initially hired 65 young people. Then, with a second loan of $120,000, also guaranteed by Thembani, they increased the number of employees to 200, working in shifts. Their latest loan is worth about $1 mn, with $800,000 of it guaranteed by Thembani. With those funds, the women plan to meet European Union health and safety standards and start exporting their produce.
A different approach
The Pankop Women Farmers Forum reflects the new face of microfinance in Africa. Traditionally, microfinance institutions have often been non-profit groups relying heavily on donor money, targeting basic needs and generally giving out only small loans. But increasingly, private equity funds and philanthropic groups and individuals are making it possible to leverage significantly larger loans. They do so by giving loan guarantees to local commercial banks, which reduces the perceived risks of lending and leads the banks to release more money.
Since its inception in 1994, Shared Interest has given guarantees worth over $13 mn, encouraging South African banks, municipal unions and private companies to disburse some $100 mn. Such loans have benefited more than 1 million low-income South Africans. Three-quarters of the beneficiaries have been women.
Donna Katzin, president of Thembani’s parent organization, Shared Interest, told Africa Renewal that her group does more than just create access to financing. “Thembani identifies projects and partners, helps them develop business proposals and plans for bankable projects and hooks them up with banks that are able to provide the credit.” “We are introducing [the banks] to a new set of people who need their capital,” she adds.
According to the World Bank’s International Finance Corporation (IFC), women own about 48 per cent of all enterprises in Africa. But they have the hardest time gaining access to finance.
Non-governmental organizations like Shared Interest are not the only ones using guarantees to improve women’s access to credit. The International Labour Organization and the African Development Bank (ADB) have jointly created a $10 mn guarantee scheme called Growth-Oriented Women Entrepreneurs (GOWE), with the ADB and IFC managing the operation. GOWE is intended to help about 400 women entrepreneurs across Africa to secure access to financing by 2011. For prospective borrowers to qualify, their businesses must be at least two years old and show potential for growth. Those who are approved can borrow between $20,000 and $400,000, but are expected to raise 20 per cent of the expansion costs on their own.
According to IFC Operations Officer Mary Njoroge, “by focusing on established small and medium enterprises that are looking to expand,” the organizations hope to “increase the share of women’s enterprises that actually make it to middle and large scale.”
‘Make successful’ loans
In Kenya, the UN Development Programme (UNDP) has partnered with Equity Bank to set up a fund to provide $81 mn in loans exclusively to women. “We call the loans fanikisha [“make successful”] and it has been one of our most successful products yet,” Equity Bank Chief Executive Officer James Mwangi told Africa Renewal. “Fifty-four per cent of the customers at our bank are women, and they have the best loan-repayment reputation.”
In Kenya, 61 per cent of household entrepreneurs are women, but two decades ago getting the necessary financing to expand businesses was difficult for them. In 1981, a group of women came together and formed the Kenya Women Finance Trust (KWFT). Initially, KWFT relied on limited donor funds and loans from commercial banks. The latter often came with high interest rates, a cost KWFT had to pass on to its clients. According to KWFT’s chief executive, Jennifer Riria, the trust faced many defaults and became heavily indebted.
But as commercial banks have realized that lending to women can be profitable, loans to organizations like KWFT have become cheaper, enabling it to lend at lower rates and expand its reach. Today, it is the largest microfinance institution for women in East and Central Africa.