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Four ways to boost investment in women-led small businesses

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Oxfam’s conversations and projects with entrepreneurs across the globe reveal a big gender gap in access to finance, says Windy Massabni. Women in business tell us that better support for them will include loan guarantees, alternative credit scoring systems and building the gender awareness of lenders.

Women selling mangos on the streets of Oyam, Uganda (picture: Windy Massabni)

“In Uganda where I come from, women still do not have the right of inheritance. All the assets and properties go to the male heir,” explains Marion Etiang, the founder of the Shea Care company in Uganda. “It’s up to men to give what they deem fit to the female in the family. Typically, when a woman goes to the bank to seek a loan for her business, the bank would require collateral which is often asset-based, even if she has the cash flow.”

Marion highlights a major root cause that holds women-owned businesses back: discriminatory gender norms over inheritance capital, capital that is therefore only available to men, not women, to grow their businesses. Such regressive gender norms lie behind the glaring gender gap in access to business finance.

BRINGING INVESTORS CLOSER TO WOMEN-LED SMES

In the realm of entrepreneurship, there’s often a disconnect between investors and small and medium-sized enterprises (SMEs). While much effort is dedicated to making women-led SMEs “investment-ready”, little attention is paid to fostering “SME-readiness” or openness among investors or financial institutions. This oversight perpetuates inequalities in access to finance, particularly for women entrepreneurs.

But what if we could bring investors closer to women-led SMEs? In a survey conducted as part of Oxfam Novib’s project to support SMEs, the Impact SME Development programme, lack of collateral or assets was cited by women-owned businesses as a major obstacle. We also found that while 57% of businesses owned by men and 68% with mixed gender ownership sought external finance, only 46% of female-owned businesses did so.

Interestingly, women-owned SMEs had a 95% success rate in securing external funding, compared to 77% for male-owned and 93% for mixed-gender-owned businesses. This suggests that women entrepreneurs may be more reserved in seeking external funding. This is backed up by research by the Financial Alliance for Women, which found that women who are customers of financial service providers were more “risk conscious” then men, and more likely to sacrifice a potential upside in exchange for lower risk or less debt.

So how can we support women entrepreneurs to get the finance they deserve and that can help their firms thrive? Tackling root causes such as sexist inheritance customs and laws will of course be crucial for long-term change – but alongside this the women we talked to pointed out how NGOs and other support organisations can take action now to help them in four broad areas.

1. LOAN GUARANTEE SCHEMES

Many women emphasised the potential effectiveness of long-term guarantee schemes and partnerships. These local guarantees effectively protect financial institutions from losses if borrowers default, incentivising them to lend to women-owned businesses, even without collateral.

Abrar Shahriyar Mridha, Enterprise Development Project Manager at Oxfam GB, oversees a multi-country programme providing access to sustainable capital to help SMEs grow, and says such loan guarantees can transform the prospects for women-owned enterprises. “Partnering with banks and financial institutions gives us leverage to access women-led MSMEs, making them more bankable. These enterprises have created almost 18,500 jobs for women and reached 55,000 farmers, with 49% women in leadership positions.” Abrar’s example vividly illustrates the transformative effect that guarantee schemes can have on women-owned enterprises, fostering economic empowerment and gender equality.

2. ALTERNATIVE CREDIT SCORING – AND INCLUDING “SOCIAL PERFORMANCE”

Women are more reliable borrowers then men. Financial Alliance Women found that men are far more likely to be failing to keep up with repayments than women. Yet women continue to be underserved when it comes to accessing loans.

Different ways of assessing credit-worthiness  can help. That means analysing cash flow and business performance, rather than relying solely on traditional collateral-based assessments.

What could make a big difference is looking not just at conventional metrics but at the social capital created. Hassan Hajam, the Executive Director of Platform Impact, the Impact SME programme’s main partner in Cambodia, says: “Investors should design innovative, alternative financial instruments for impact-driven SMEs We have to move away from the typical balance sheet, profit-and loss statement, cash flow etc.. by integrating social and environmental dimensions at the end of the profit-and-loss statement if we want to see real impact thrive.”

By prioritising investments in businesses that can show such “social performance” – supporting gender equality and empowering women economically – investors can address disparities in access to finance.

3. FLEXIBLE PRODUCTS WITH SMALLER LOANS

An often-overlooked aspect of addressing gender inequality in access to finance is reassessing the size of investments. Many investors typically focus on offering large loans, often exceeding $1 million, which may not align with the needs of small and medium-sized enterprises (SMEs), especially those owned by women. These businesses frequently require smaller investments ranging from $100,000 to $500,000 to scale effectively.

Recognizing this disparity, initiatives such as our newly launched Pepea Fund aim to bridge the gap by providing smaller loans with a gender-lens tailored to SMEs, in this case with a focus on climate change mitigation. While we acknowledge that smaller investments may pose higher costs for investors, it’s imperative to take account of the social impact of such investments alongside the financial returns. We offer “mezzanine” loans, flexible loans with flexible terms that do not necessarily require tangible assets as security. This flexibility makes them more accessible to women entrepreneurs who may lack traditional collateral, such as property or equipment.

4. GENDER DIVERSITY AND GENDER AWARENESS IN FINANCIAL INSTITUTIONS.

Ensuring lenders have a gender-diverse team is also crucial in addressing the biases and barriers faced by women entrepreneurs. This requires gender balance at all levels of a financial institution – from the executive level to front line staff.

At the ANDE x Sasin Business School Women Impact Entrepreneurship Day 2024, one business leader shared her experience of intimidation while applying for a loan at a bank.

As the head of a sustainable packaging company in Thailand, she had all the necessary documentation for the loan and met all the requirements, yet faced extensive questioning from the predominantly male staff. She felt compelled to prove her legitimacy, showcase her qualifications, and justify her ability to manage her business alongside motherhood.

This unsettling encounter underscores the need both for gender balance and for gender-sensitivity training for bank staff so they can better serve women. Alongside this lenders  will need a gender-lens investment strategy, fostering an environment where women entrepreneurs feel respected and supported, without encountering undue scrutiny or bias.

BUT WE ALSO NEED TO KEEP CAMPAIGNING ON ROOT CAUSES

Initiatives such as guarantee schemes, alternative credit scoring methods, and promoting gender diversity in fund management teams are essential steps in bridging the gender gap in SME financing. However, while these efforts do help alleviate immediate barriers, they do not address the root causes of gender disparities.

NGOs such as Oxfam and enterprise support organisations have a crucial role to play, not just in providing support through initiatives like those above, but also in advocating for policies and practices that tackle root causes, that change norms and systems and lay the foundations for true gender equity in access to finance.

This article was first published on Oxfam’s Views & Voices blog

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the author:

Windy Massabni is an Impact SME development specialist based at Oxfam Novib in the Hague. She coordinates the influencing, learning and training component of the programme in all countries.

Aid agencies can’t police themselves. It’s time for a change by Dorothea Hilhorst

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The spreading “Oxfam scandal” will affect the entire humanitarian sector painfully. It brings into plain sight what observers of the internal workings of NGOs have known for a long time: NGOs have an organisational reflex of banning outsiders from their kitchen, and keeping their potentially dangerous secrets hidden.

Abuses of power are common in any situation where vulnerable people depend on powerful service providers. But the key question that still haunts this sector is how organisations should deal with the rotten apples – the abusers of power. Even though Oxfam has taken earlier abuses and misconduct seriously, the organisation has acted alone and resorted to internal measures in dealing with the problem.

The case of the Oxfam country director hosting sex parties in the staff house in Haiti after the 2010 earthquake – perhaps it is only the tip of a rapidly expanding iceberg.

What matters is how organisations respond to such incidents. Have trespassers been sanctioned, and was the harm done redressed? Were the disciplinary procedures transparent, and have efforts been made to avoid the repetition of these events?

Read the full article on Irin News

Picture credit: Zephyris

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Dorothea Hilhorst is Professor of Humanitarian Aid and Reconstruction at the International Institute of Social Studies of Erasmus University Rotterdam. Her blog article ‘Emergency sexwork: should NGOs recognise transactional sex as livelihood strategy?‘ further touches on the topics discussed in this article.

Eight years after Haiti shook: where has all the money gone? by Avagay Simpson

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UntitledAbout the author:

Avagay Simpson is a recent graduate of the International institute of Social Studies with a Master’s degree in Development Studies specialising in Governance and Development Policy. Prior to studying at the ISS, she worked with Office of the Contractor-General, one of Jamaica’s key anti-corruption organisations. She also worked for several years in project implementation focusing on enhancing governance locally and nationally in Jamaica and the Caribbean. She also holds a graduate degree in International Relations.

Eight years after the earthquake that in 2010 crippled the small country of Haiti, scores of Haitians still have not been able to rebuild their lives despite billions of dollars pledged in the form of humanitarian aid. Recent research on the dynamics of the Dutch partnership SHO for humanitarian assistance in post-disaster Haiti shows that an overreliance on trust within partnerships decreases operational effectiveness and transparency, and that more checks and balances are needed to ensure that financial aid reaches those Haitians still in need.

The struggle continues

Eight years have come and gone since an earthquake measuring 7 on the Richter scale on 12 January 2010 devastated Haiti and ripped apart its community. The earthquake caused the displacement of millions of Haitians and the death of over 300,000 people, although this number remains inconclusive. It was labelled as the first major urban disaster in recent history, leading to humanitarian aid pledges totalling over US$13 billion.

While eight years have passed since this tragic event, the United Nations reported that by 2017, many Haitians were still residing in camps and more than 2 million people were still in need of humanitarian assistance. Given the disjuncture between the total amount of aid pledged and those Haitians still requiring help, a burning question that scholars, journalists, and humanitarian practitioners have sought to answer is: “Where has all the money gone?”

Partnerships: Too untransparent?

Multiple explanations have arisen for why responses to the Haitian disaster were ineffective and produced a chaotic post-disaster environment. One of the many views is that the coordination of international relief efforts posed a major challenge to relief efforts, in addition to the lack of accountability in the disbursement of received donations. Partnerships forged between NGOs and international organisations have become commonplace particularly in the humanitarian relief sector due to the belief that such partnerships could maximise economic benefits for partners and strengthen organisations’ individual efforts through collaboration.

However, a number of scholars, such as David Lewis in his book Non-Governmental Organisations, Management and Development, have suggested that civil society partnerships receive less respect than intended due to the degradation of the term ‘partnership’ following extensive scrutiny over the past years. Considering this tainted image of partnerships, Lewis argues that the management of NGOs and the inter-agency partnerships they create need to be reviewed.

With this in mind, my recent research* attempted to provide some answers to questions pertaining to this ‘black hole’ of humanitarian aid in Haiti by reviewing partnerships among civil society NGOs and organisations, with particular attention paid to partnership dynamics such as transparency and accountability. It comprised an analysis of the Dutch NGO emergency relief efforts in Haiti during 2010 by exploring the collaborative processes of Dutch NGOs through the Stichting Samenwerkende Hulporganisaties (SHO) partnership. Network governance theory allowed for a closer look at the governance of this network and the effect of governance dynamics on upward transparency and accountability.

The SHO: Too large to handle?

The SHO is a Dutch platform comprising nine development organisations such as Oxfam Novib, UNICEF and Save the Children that calls for and manages public donations for humanitarian aid following disasters. Following the Haitian earthquake, the SHO raised €112 million through public donations following extensive media campaigns. The Dutch Ministry of Foreign Affairs donated approximately €41 million, or one-third of the total, to the SHO for disaster relief efforts.

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However, the Dutch public and government, like the international community, questioned the efficiency and effectiveness of the use of donated money for the benefit of disaster-affected Haitians. The Netherlands Court of Audit (Algemene Rekenkamer) with its mandate of checking the efficient and effective spending of public funding in its 2010 expenditure report found that “the funding flows in Haiti are not sufficiently clear and it cannot be determined what part of the aid funds is received by which international umbrella organisations, fellow aid organisations and the organisations’ own field offices” (Court of Audit 2011: 5). This report, alongside the IOB Evaluation Assisting Earthquake Victims: Evaluation of Dutch Cooperating Aid Agencies (SHO) Support to Haiti in 2010 by the Policy and Operations Evaluation Department (IOB – Inspectie Ontwikkelingssamewerking en Beleidsevaluatie) of the Ministry of Foreign Affairs, were the key foci of this study.

The research found that the SHO in its relief efforts in Haiti made use of a network of 36 organisations that excluded local Haitian civil society organisations, NGOs and government organisations. The member organisations operated in five different modalities. This resulted in a number of issues related to the coordination and implementation of programmes and relief efforts, including: extensive management chains; increased transaction costs; the duplication of activities; value clashes resulting in operational challenges; and multiple accountability disorder due to the presence of multiple principals and agents. This made it difficult to trace the funds and to assess whether they were effectively and efficiently expended.

Overreliance on trust

The SHO network and the independent functioning of each participating organisation in implementing their activities created a complex system that resulted in major challenges related to oversight and a lack of transparency regarding the spending of public funding.

The SHO and its member organisations relied on trust in each other to ensure that each activity was implemented in accordance with the principles of transparency and accountability and to the standards governing emergency humanitarian aid. This strong level of trust ignored the fact that individuals are rational beings that in group settings will not necessarily act in the common interest of the group, but may pursue certain objectives based on self-interest.

The study found that the interests of not only individual actors is of concern, but also those of the individual organisations in the extended network, as their interests may differ from that of the SHO and its members. The lack of strong oversight mechanisms by the SHO to determine if there was a breach and its inability to hold actors accountable or apply sanctions weakened the veracity of the reports and work done, resulting in the questions of transparency and accountability of the aid given in Haiti.

Conclusion

MILITARY RELIEF EFFORTS IN HAITI

The SHO’s example shows that heavy reliance on trust is a major issue requiring a thorough review by all organisations working in the humanitarian aid sector. The recent disclosure in October 2017 by the International Federation of Red Cross and Red Crescent Societies (IFRC) of instances of fraud by officials involved in combating the Ebola outbreak in West Africa from 2014-2016 amounting to €5.2 million heightens the need for NGOs as well as international organisations to review their approaches and to recognise the need for adequate checks and balances.

In an emergency humanitarian relief context that is complex, uncertain, and often political in nature, sound policies and transparent processes contribute to sound governance. Such measures also control unintended meanings and consequences while simultaneously acting as barriers against the purposeful exploitation of resources that ultimately prevents aid from reaching those in need.

Picture credit: RIBI Image Library

*In partial fulfilment of a recently attained MA degree in Development Studies at the ISS.
REFERENCES
Dutch Court of Audit (2011) ‘Accounting for Haiti Aid Funds 2010’, November 2011, The Hague: Netherlands.