Only 16.7% of women-owned businesses access loans from banks — Moniepoint

A Moniepoint report has revealed that only 16.7 percent of women access loans from financial institutions for their businesses.

“Only 16.7 percent of women are able to get access to the loans their businesses need via financial institutions,” Moniepoint revealed in its report titled, ‘Funding Nigeria’s women-owned businesses — A case study on Moniepoint’s Working Capital Loans.’

The report explained how women fund their businesses but noted that funding sources are few for women-led businesses. It said, “With a financing gap of 32 percent, women are either less likely to receive funding, or they receive smaller amounts when they do.”

Read also: Survey shows how businesses face 75 different taxes in Rivers

Moniepoint noted that 40.2 percent of women use their funds and savings to run or start their businesses, and 59.8 percent raise funds from external sources. While exploring the external sources, the report revealed that a greater number of women access funds from family and friends, either as loans or cash gifts.

“External sources of funding for women include loans from family (34.7 percent), gifts from family and friends (26.4 percent) government grants (12.5 percent), loans from financial institutions (16.7 percent), loans from cooperatives (6.9 percent), and crowdfunding (2.8) percent,” it said.

Moniepoint established that female founders who had started out with personal funds find it difficult to raise funds in the long run. “Personal savings are often considered as an alternative to external funding, but women who started with personal savings rated the difficulty of accessing funding even higher,” it stated.

One female entrepreneur, Sahrah, stated that she didn’t initially see the role funding played. “I was three months in before I realised I made a fundamental planning mistake. I went back to the drawing board to start afresh and pivoted to the part of the business I could begin to generate immediate cash flow,” she said.

She noted that when funding wasn’t forthcoming, she started seeking funding through family and friends, but couldn’t raise much. “Luckily, we had our first client, a finance house, and through her, we got a direct loan. We haven’t received any external loan since then. Overall, it took 8 months to access capital,” Sahrah added.

Female-founded startups are key drivers of innovation and inclusive growth in Africa. Research shows that they generate higher revenues, create more jobs, particularly for other women, and start businesses in high-impact sectors like health and education.

However, female entrepreneurs continue to face significant barriers to raising capital. Since 2014, women-founded startups have accounted for less than 5 percent of venture capital funding in Africa.

The fintech highlighted that unconscious bias, diversity in leadership composition, societal constraints and financial habits, and lack of awareness are major funding challenges women-owned businesses face.

Read also: Traders of Africa unveil new alliance to connect businesses to global markets

Moniepoint noted that avoiding bias or discrimination marks the first step to bridging the gap. It added that providing women with tools to accept payments digitally and quick access to credit facilities without overleveraging them would help sustain their businesses.

The fintech further revealed that access to credit helped more women scale. “Our interviews revealed that women who had access to credit and other external funding sources were more likely to have multiple stores. This emphasises the importance of credit access for businesses, particularly women-owned businesses looking to expand their market share,” it noted.

A study by the African Development Group on 47 African countries showed that women tend to exclude themselves from the credit market and do not apply for loans or credit because of fear of being denied.

Moniepoint noted that “this aversion likely has close ties with an aversion to credit, as some of the women entrepreneurs we spoke to mentioned seeing it as “going into debt.”

It advised that financial literacy and awareness are needed to encourage women to seek funding for their businesses despite the seeming odds.