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Stuck at the small-scale level

In sub-Saharan Africa, many women run enterprises of their own. All too often, however, they find it difficult to expand their business, generate more income and create additional employment. Women entrepreneurs will only rise to their full potential if they are given full access to all financial services, provided with adequate professional advice, and supported by overall favourable regulatory environments.

[ By Ngozi Okonjo-Iweala ]

African Women are not caught in a trap that would not allow them to move into business. According to a study published by the African Development Bank in 2004, the continent’s women own many micro, small and medium enterprises. In fact, female ownership of such businesses ranged from a low of 46 % in countries like Kenya and Malawi to as much as 84 % in Swaziland. So we need not waste time worrying about how to get African women into business, they are already there.

That said, we need to help them escape another trap. Businesses run by women tend to be so small that they simply can neither be as successful as they deserve to be, nor have the economic impacts on employment and incomes they should have. We must therefore strengthen women’s abilities to run and expand their businesses.

“The onus is on us”

Three distinct elements constitute the trap that keeps women entrepreneurs stuck at the small-scale level. First, there is a lack of access to finance. Second, women need better advice and business services. Third, national and international regulations often stand in the way of growth. The World Bank is right in arguing that “gender equality is smart economics”. But Africa must not wait for donors to become active. The onus is on us, and civil society should exert pressure on governments to rise to the challenges.

Microlending is something that can help. Access to such loans is very important, particularly in rural areas. The work of the Grameen Bank, BRAC and others in Bangladesh is providing wonderful examples for us. However, it is not enough to focus on microcredit. There is a great number of women whose businesses are too big to have much use for micro loans. In principle, they would be ready to expand and employ more staff, but they cannot do so for lack of funds.

Risk-adverse behaviour is typical of most African banks, and their stance makes financing investments difficult for most male entrepreneurs too. But for women, the challenge to provide some kind of security, for instance, is particularly daunting. More often than not, land is legally owned by male family members – and that is the kind of collateral most bankers want to see.

Surely, there must also be other ways to leverage and guarantee resources to women. In Iran, women use beautiful Persian rugs as collateral. Gold, silver or jewellery in general are other options. Anything that can be given a paper value can, in principle, serve as a security in financial deals. We need to stimulate thought on these issues in Africa, we need innovative approaches.

In Nigeria, we have laid the base for a brighter future. We have gone through a process of consolidation in the financial sector. Instead of formerly 89 banks there are now 25. Competition has become tougher, banks will have to move on from merely trading assets to investing in productive businesses if they want to thrive. In other words, the banks will have to become more innovative, and that should make them more interested in doing business with women too.

However, we should not confine ourselves to thinking only in terms of credit. There is a need of other mechanisms to open up fonts for women as well. It would make sense to establish venture-capital funds for women’s businesses. Donors, governments and the private sector should pull together and cooperate on that matter. In a similar sense, it would be worthwhile to have insurances cover relevant business risks. In other words, the entire range of financial services must become available to women entrepreneurs if we want to see them rise to their full potential.
However, financial bottlenecks are only one category of constraints that prevent women’s businesses from expanding more dynamically. They need other services as well. Too often, owners of small enterprises lack the capacity to systematically draft a business plan. Too often, they do not know how to do a cash-flow analysis in order to really understand how their business is doing. Obviously, they need competent advice from professional consultants on such matters.

A question of quality

In particular, it is important that they learn to think in terms of supply chains. It is not enough to consider what women can produce and how they can do that. Marketing matters too, the products must be sold. It is one thing to grow flowers and quite another thing to auction them in Amsterdam. In Uganda, I saw an example where advisers, with very good results, accompany flower growers from the production all the way through to marketing, including assuring quality. That approach could work out well in other sectors too, textiles and clothing, for instance. Once a company becomes part of an international supply chain, the chances for it growing steadily and generating more income multiply. But for that to happen, production must meet certain quality standards. Female entrepreneurs need assistance to move up that ladder.
Finally, regulations matter. National policy, for instance, may block businesses even if it is well intended. In my country, an attempt to protect the textile industry actually ended up harming many women working as fashion designers and producers. Nigeria simply banned the import of all textiles. Accordingly, some imports that these women needed to produce the clothes they were exporting elsewhere were banned too. These women brought the problem to our attention, and we had to deal with it.

The example shows that national policies matter – but so do international regimes. Today, we are noticing that Chinese companies are copying traditional Nigerian tie-dye designs. Their products are flooding our markets at very low prices, increasingly driving local competition out of business. These designs, however, are not patented. So intellectual property from Nigeria is being used now in a way that is detrimental to our economy, and that is not an acceptable institutional setting – even if the persons who do that kind of work in China happen to be women.