“Thank you, you’re going to need a husband.”
That’s what a bank manager told Mercy Githinji, owner of the Uzuri Institute more than a decade ago, when she was looking for money to expand the institution.
Ms Githinji recalls hopping from bank to bank looking for 15 million shillings. She describes the ordeal as a headache. “I wasn’t married and that was a big deal.”
The banks kept pushing her away until a bank manager pushed her aside and ‘whispered’ how her lack of a husband was preventing her from accessing loans.
“I really thought about it. I even approached a friend to pose and be my husband, but then I thought: What am I doing? I said, let me go by faith “The money eventually came in,” she said.
Ms. Githinji was among the small business owners who spoke about the challenges they face when seeking capital for their businesses.
This was at the launch of a report entitled Access to finance for SMEs compiled by WYLDE International, a consulting firm that helps start-ups and small businesses scale their operations.
The funding conundrum for women
At the event, women business owners shared their difficulties in accessing finance and why lenders blocked them.
While collateral has been cited as the main cause why many businesses cannot access capital in the form of credit, women-owned businesses seem to suffer a double tragedy simply because of the gender of their owners.
These barriers to accessing funds later affect the performance and trajectory of their businesses.
A 2019 World Bank report titled Harnessing Parity: Unleashing the Potential of Women’s Enterprises in Africa notes that businesses run by women are less successful than those run by men.
The report states that the simple fact that women tend to have less assets and savings than men can significantly reduce their financing options.
“Financial assets allow business owners to increase their asset base, finance productive investments and smooth household consumption. When financial markets are imperfect, the ability of entrepreneurs to obtain financing is largely determined by their ability to provide collateral rather than the stream of revenue their business can generate,” the report reads.
“Even where laws do not restrict women’s access and control over assets, providing collateral is more difficult for women due to their smaller asset base.”
The report lists countries in Africa where formal business and family laws deny women equal rights with men to register a business, sign a contract, open a bank account, or own and inherit property.
“For example, in Cameroon, Chad, the Democratic Republic of Congo (DRC) and the Republic of Congo, the law gives husbands exclusive control of marital property, making it difficult for married women to obtain loans for fund their business since these loans often require collateral,” the report states.
“In Chad, Guinea-Bissau and Niger, married women need their husband’s authorization to open a bank account. In Equatorial Guinea, a woman needs her husband’s permission to sign a contract.
Young without guarantee
Maureen Nyambakane, an entrepreneur, also encountered similar difficulties. When she started her business and ran Usafi Sanitation which offers waterless toilet solutions, she says she was young and had no guarantees.
This was before she launched Nyayo Moms Sokos, a digital marketplace, information and resource center for businesswomen.
However, she had access to marital property through her mother.
Ms Nyambakane says her mother was aware of her struggles after seeing her savings after quitting her job to go into entrepreneurship. His business was capital intensive. “My mother had this guarantee and said I could use it,” she recalls.
Mrs. Nyambakane then went to her mother’s bank where she had been banking for 30 years and she was able to borrow 20 million shillings.
“And I remember the bank rightly asked me if I was the only sibling or did I have brothers?” “And they were very clear that if my mom was going to use the (house) warranty and I have brothers, then they had to step in,” she said.
“And I found that a little twisted because it’s my mother’s property.”
Ms. Nyambakane says she later chose to go the grant route as she did the math and realized that the loan would be very expensive to repay anyway.
“It wasn’t patient capital because I would ship the products, which would take 90 days, and then you would start trading. I did the math and thought it didn’t make sense. I don’t think I need to have that kind of pressure when I’ve already lost money,” she said.
Why banks fear marital property
Ken Waititu, SME manager of Rafiki Microfinance Bank, explained that when it comes to credit, banks are afraid of matrimonial assets.
“So you wonder if I was supposed to have a husband, and when you go to get the property, it also becomes high risk because you can’t evict me from my matrimonial property,” Waititu said.
He said that in most cases any property held jointly by wife and husband is problematic.
“We don’t even prefer it,” he said. “So what are the banks saying long term and short term? This sounds more confusing than it should make sense.”
These challenges, it was noted at the launch, cause women-owned businesses to operate at a lower level with below-average gross sales because their businesses are either stunted or simply meant to survive.
Amina Arif, Country Manager Kenya Cluster of the International Finance Corporation (IFC) shares the same opinion.
During an interview with FM Spice, she noted that globally, 1% of procurement contracts are awarded to companies led or owned by women. In Kenya, the figure is three percent.
Ms Arif said the 3% figure in Kenya was perhaps more impressive, but the reality is that most of these contracts are low value-added.
“Most of these female businesses are subcontractors and operate at the lower end of the value chain. They will often provide catering or cleaning services, instead of providing higher value-added goods and services,” she said.
She said that while all SMEs struggle to access finance in general, women struggle more. But all is not so gloomy for the financing of women’s businesses. The majority of lenders, including microfinance institutions, tailor loan products for them.
“Over 70% of my loan portfolio came from female entrepreneurs. Compared to 30% of male entrepreneurs, women repaid well and hardly defaulted,” said a former relationship manager with one of the banks in microfinance.