Women entrepreneurs make a substantial contribution towards the economic growth of a country.

In Kenya, women-owned businesses have the biggest investment impact, supporting huge portions of household budgets. However, a report by African Development Bank estimates a USD 42 billion financing gap for women in Africa today.

As a result, many female-owned businesses do not actualize their potential; and many investors miss profitable investment opportunities.  

Most businesses ran by women tend to be in the informal sector, mainly in the service sector, and thus operating in lower value-added sectors. They are also typically smaller, employing fewer people. These factors pose a challenge when it comes to loan provisions because financial institutions tend to categorize SMEs according to loan size, turnover, and the number of employees.

Businesses that do not meet the threshold of these three categories, therefore, pose a high level of risk to finance. In addition, lending to SMEs often poses a challenge due to the poor bookkeeping, lack of data, and consensual definitions encountered in most SMEs.

In an interview with Hope Media, Family Bank’s, Senior. Manager Trade Finance Rahab Mbugua, said as a bank they have found other ways of helping SMEs with such challenges as it seeks to position them as credit-ready for financing opportunities.

“Through seminars, workshops and clinics, we are offer to empower our MSMEs with critical foundational, business, capital raising and legal skills and also empower them with newer solutions in trade finance that are innovative, friendly and cost-effective away from the traditional way of doing business,” said Rahab. 

According to Rahab, guarantees are critical in supporting lending towards the sector.

Rahab also notes that taking a gender lens approach to the challenges faced by women-led businesses is also key. This includes leveraging women-focused organizations to increase awareness about programs these entrepreneurs might be eligible for, as well as minimizing the hurdles these businesses face when accessing financing.

Other technical business support needs include scenario planning, cost optimization, liquidity management, and legal advice on contract negotiations and improving access to digital tools and financial inclusion services.