SPEAKING at the CEO Forum 2024 in Kigali, Rwanda, last week, Marie Ange Mukagahima, founder and CEO of Zima Healthy Group Ltd voiced her frustration about the difficulty of securing funding for business expansion. The main challenge, she explained, is that lenders focus more on collateral than on evaluating the demand for her company’s products in the market.
“They should focus on the potential of my business, not just collateral,” said, whose company produces natural, pumpkin-based products.
“They should be asking ‘Who will buy your products?’ instead of ‘What can you put up as security?’ That’s what has been holding me back from getting the loans and investments I need.”
Mukagahima’s experience reflects the ongoing challenges faced by African women looking to secure startup funding.
According to Africa: The Big Deal, a startup funding data tracker, in 2023, startups with solo or all-female founders secured just 2.3% of total African startup funding. This rises to 15% for teams with at least one female founder. In 2022, these figures were 2.4% and 13%, respectively.
The challenge extends beyond startups and impacts other women entrepreneurs as well.
The African Development Bank (AfDB) sees a US$42 billion financing gap for African women entrepreneurs compared to men. The bank attributes this partly to the misperception that women are riskier borrowers due to a lack of collateral and financial experience, leading to their loan applications being rejected.
And yet, closing the gender gap in entrepreneurship could add a US$2.5 trillion boost to Africa’s GDP by 2025, according to the World Bank.
One of the women leaders championing financial access for African women entrepreneurs is Angela Ngo Ndouga, CEO of Yellow Factoring, a Cameroonian company that provides financial solutions to SMEs. The company directly addresses the funding gap by purchasing invoices from SMEs, particularly those led by women, to provide them with immediate cash flow.
When the SMEs sell their invoice, they receive a percentage of the invoice value upfront, typically around 70-90%, which allows them to meet their immediate financial obligations, such as paying suppliers, and employees, or investing in growth opportunities.
“Women-owned SMEs need a champion who believes in their potential, and that’s what we are doing. At Yellow Factoring, we are providing a solution offering them working capital within a year. To date, we’ve impacted over two million individuals, supporting them on their path to success,” Ndouga said.
The need for more gender-neutral funding and support for women-led businesses is urgent, as highlighted by Chilufya Mutale, Co-Founder of Premier Credit, one of the leading financial technology firms in Zambia.
Premier Credit has taken steps to offer microloans, supporting local entrepreneurs and small-scale traders, many of whom are women. They provide alternative funding solutions through micro-loans and a Peer-to-Peer (P2P) lending platform powered by artificial intelligence, which connects investors with borrowers, expanding access to capital even in remote areas.
In their quest to financial inclusion, Mutale said Premier Credit has forged partnerships in mobile financial services. These partnerships, she explained, ensure that individuals without access to physical branches can still participate in the financial system.
Merging capacity-building initiatives with financial support
Women entrepreneurs often tend to be over-mentored and under-capitalized, according to Asahi Pompey, President of the Goldman Sachs Foundation. Speaking at the Africa CEO Forum 2024 on May 16, she highlighted the need to address unequal opportunities faced by women entrepreneurs through a combination of educational support and financial backing.
The foundation created a free online curriculum called “10,000 Women” to provide education to women entrepreneurs. Over 100,000 women from more than 200 countries completed the program, said Pompey, yet the issue of inadequate funding remained.
“That’s why we partnered with the International Finance Corporation (IFC) to create the Women Entrepreneurs Opportunity Facility where we’ve now catalyzed $3 billion of lending to women entrepreneurs in 56 countries [especially Francophone Africa]. We want more women to access these programs because we understand their potential. Now we’ve got to match that with the know-how,” Pompey said.
One of the challenges in lending to women is the informality of their businesses and the lack of data for credit assessment.
This prompted Josephine Anan-Ankomah, Managing Director of Ecobank Kenya, to advocate for challenging conventional practices, resulting in the creation of Ellevate, a flagship gender financing program by the bank.
“It goes beyond just providing loans. We focus on empowering women with the skills they need, connecting them with potential customers, and then finally providing access to financial resources. Why this approach? Because simply giving women access to loans for their small businesses (SMEs) isn’t enough. We need to empower them first. That’s how we challenge the status quo.” Anan-Ankomah explained.
Beyond CEOs: women needed in all financial roles, special programmes
The financial sector needs women at all levels, not just CEOs. For instance, in Rwanda, despite 50% of banking sector CEOs being women, men hold most frontline positions.
This creates a perception that financial services cater primarily to men, said Pitchette Kampeta Sayinzoga, CEO of Rwanda Development Bank (BRD), adding that challenging traditional gender roles, especially in financial decision-making, is equally important given that 86% of Rwandan women consult their spouses before making final investment decisions.
“Women tend to overestimate the risk that comes with taking loans,” she continued. “In fixing that problem via highly targeted financial literacy programs, it is important that we do it separately from men.”
In addition to other efforts to address the challenge, BRD took a unique approach in September 2023. They issued their first-ever sustainability-linked bond specifically to raise funds for SMEs, including specific targets to support women-led businesses.
“We’ve made a commitment to doubling the number of women-led businesses in our portfolio,” explained Sayinzoga.
“To incentivize achieving this goal, there’s a financial reward system in place. If the target is met, the bank’s treasurer receives a 40 basis point reduction on a relevant financial metric; missing the target results in missing out on these incentives. There’s also a penalty of 60 basis points for failing to report on progress towards the target. Initially, only 12% of our portfolio consisted of loans to women-led businesses; we aim to reach 30 per cent by 2028.”
