Micro, Small and Medium Enterprises (MSMEs) owned by women are faced with gender bias when it comes to access to trade finance, the International Finance Corporation has revealed.
In a recent report, the IFC disclosed that this limits economic growth and perpetuates poverty in emerging markets. The global development institution stated that despite women-owned ventures contributing substantially to sectors like agriculture and retail in countries like Nigeria, they encounter disproportionate challenges in securing trade finance from banks.
It said, “Women-led businesses are often viewed as inherently riskier, leading to reluctance in extending credit as women prioritise household obligations over business commitments.”
“Incomplete records, small business size, and lack of collateral exacerbate the challenges faced by women entrepreneurs,” it continued.
These factors contribute to hard loan requirements and frequent rejections from financial institutions, significantly impeding the growth potential of women-owned enterprises.
Also, societal misconceptions about the repayment capabilities of women entrepreneurs persist despite empirical evidence to the contrary, IFC highlighted.
Recent studies cited by the developmental institution revealed that women entrepreneurs are more likely to repay loans than their counterparts, debunking notions of inherent riskiness.
Nigeria, a focal point in the report, illustrated women-owned MSMEs’ stark realities in the agriculture and retail sectors. While prevalent in these industries, women entrepreneurs encountered insufficient access to trade finance due to perceived risks associated with commodity price volatility and climate-related challenges.
The Gender-Disaggregated Data Analysis of the Nigerian Lending Market Report revealed that 98 percent of Nigerian women are left out of formal credit markets due to their lack of trust in formal institutions, lack of awareness of credit products at the market, or belief that they lack the qualifications for a loan.
In the same vein, the report identified low education and limited decision-making power as some of the factors that exacerbate financial exclusion issues for Nigerian women.
Henrietta Bankole-Olusina, vice president of economic inclusion at RPA, noted that the importance of gender-disaggregated data analysis cannot be overemphasised.
She said, “Men and women have similar rates of formal borrowing. On the surface, this suggests that men and women face similar preferences and challenges in accessing credit. However, the large gender gap in account ownership suggests that men and women have different financial behaviours.
“If gender is considered as the only differentiating factor between these consumers, there may be key characteristics that are obscured by gender, but that also affect access and use of financial services, particularly credit.”
Bunmi Lawson, the managing director of EdFin Microfinance Bank, stressed the need to drive financial and economic inclusion in Nigeria, especially among women.
“Beyond financial inclusion, we must equally prioritise economic inclusion, as one cannot exist without the other. Efforts must be made to address the major drivers of financial exclusion such as lack of income and economic capabilities, lack of education, and low trust in financial service providers,” Lawson said.
She noted that efforts by policymakers and financial service providers to boost financial inclusion must move beyond product innovation to address the underlying drivers of financial and gender gaps through more systemic collaborations between all stakeholders.
