African Guarantee Fund, AfDB partner banks to increase loans to women-owned businesses

The African Guarantee Fund (AGF), a pan-African financial institution, says it has partnered with the African Development Bank (AfDB) Group to improve Nigerian banks’ lending to female-owned small and medium enterprises (SMEs).

AGF said it will bear 70 percent of the credit risk and banks will take up 25 percent to spur financial institutions’ interest in financing businesses owned by women.

Jules Ngankam, AGF group chief executive officer (GCEO), said his firm is taking up the burden because women are struggling with perception as regards access to capital.

Speaking at the ‘AFAWA finance series’ on Tuesday, Ngankam said women’s businesses suffer from perception because banks believe investing in female-owned businesses is very risky.

The finance series is a programme under AfDB’s affirmative finance action for women in Africa (AFAWA) initiative.

Ngankam said: “Women SMEs suffer from three perception challenges. The first one; they are African. They say Africa is the riskiest continent in the world.”

“The second thing, they are SME; SME is the riskiest business. And third, they are women. They are the riskiest gender. So when you combine all these three, then it becomes difficult to get (loan).”

Ngankam said AGF will help banks better understand the risks involved in doing business with women — especially the perceived risks and the real risks.

According to the GCEO, one of the roles of AGF in bridging the credit gap for female-owned SMEs is assisting women in securing loans without having to provide traditional collateral like land.

“In Africa, 70% of women are excluded financially, including in the areas of access to credit, land ownership, job opportunities, leadership positions and wealth creation. These imbalances have been one of the factors limiting Africa from reaching its full potential,” Ngankam said.

He said the loans are available to women-owned SMEs in all sectors.

AFDB TO CLOSE FINANCING GAP FOR WOMEN-OWNED SMES

At the event, Lamin Barrow, AfDB’s director general for the Nigeria department, said there is a $42 billion financing gap for women-led SMEs that AFAWA initiative intends to close by improving women’s access to finance.

According to the DG, in over two years, $1.2 billion has been approved by AFAWA for on-lending to women-led enterprises in 32 African countries.

Barrow said by 2026, the initiative hopes to have raised $5 billion in financing for African women-led businesses.

Commenting on behalf of Wale Edun, the finance minister, Grace Ogbonna, the acting permanent secretary and economic research director, said the lack of funding for women SMEs needs urgent attention.

Ogbonna said to ensure that women have equal opportunities that enable them to fully participate
in Nigeria’s economic growth, there must be a collective effort.

“Women constitute a substantial portion of our population and their full and equal participation in the economy is not just a matter of social justice but it is also one of economic parity,” she said.

Contributing to the discussion, Beth Dunford, AfDB’s vice president for agriculture, human and social development, said there is a growth opportunity in Nigeria if SMEs are provided with adequate support.

Dunford said SMEs have the potential to accelerate Nigeria’s progress towards its economic development goals.