About
Online
Data
16 October 2023
An interview with Malado Kaba, Director of the Gender, Women and Civil Society Department at the African Development Bank
African women face a range of challenges in accessing finance, which has led to a $42 billion finance gap for women entrepreneurs on the continent. That is one of the reasons why the African Development Bank launched our Affirmative Finance Action for Women in Africa (AFAWA) program, which is aimed at overcoming three key issues that impede women’s access to finance.
The first is a finance challenge: women-led Micro-, Small and Medium-sized Enterprises (MSMEs) are perceived by financial institutions as posing more risk. This is despite plenty of evidence that women entrepreneurs are, in fact, more likely to pay back their loans than their male counterparts. Women-led MSMEs are also more likely to lack bankable collateral than their counterparts, which creates an additional hurdle.
The second issue is capacity. Women entrepreneurs often lack the business and financial skills required by financial institutions to qualify for loans. But what is often overlooked is the capacity gap amongst financial institutions in their understanding of the women-led MSME market.
The final issue is the challenge of the business environment. In countries across the continent, there are legal and regulatory hurdles that hold women-led MSMEs back from achieving their full potential.
Our work with AFI is specifically focused on creating an enabling environment for women’s financial inclusion through legal, policy, and regulatory reforms. Under our new, four-year agreement, we will work with AFI to build on the research we have already undertaken in seven African countries to identify opportunities for reform in policies and regulations that would have the greatest impact in addressing obstacles to accessing finance.
This research is critical because we can’t fix what we can’t see. By collecting data and insights, we can craft evidence-led approaches that have the best chance of success. We can also reveal commonalities and lessons learned across countries.
I was so energized by the insights shared by central bank governors during the recent AFI Global Policy Forum. It is clear that there is a huge amount of interest and appetite to make their countries’ financial systems more inclusive. We are looking forward to working with them to turn this energy and vision into a reality – transforming the lives of millions of women entrepreneurs in the process.
To accelerate progress on these issues, partnerships will be critical. For this reason, we are truly excited about this new phase in our relationship with AFI.
Over the past decade, members of the AFI network have reported developing and implementing more than 920 policy and regulatory changes to enhance financial inclusion in their countries. Almost half of these – 428 – have been reported by members in Africa. These policy changes have contributed to the financial inclusion of 634 million people— 192 million of whom are in sub-Saharan Africa. That is an incredible achievement, which demonstrates the strength of the commitment of AFI members to advancing financial inclusion.
Partnerships between our institutions and African governments will also be crucial to build on this momentum. They have unique insight into the needs of their people—and invaluable lessons that they can share with their peers in other countries. They also have deep relationships with other financial sector actors in their countries, including the retail banks that will be critical partners in ensuring women-led businesses have access to the finance they need to grow.
This is the beginning of an exciting new initiative. Through our work together over the next four years, we aim to create a new model for gender-sensitive policy and regulatory reforms, which can be applied by governments across the continent to unlock the power and potential of women entrepreneurs.
© Alliance for Financial Inclusion 2009-2024
