WOMEN’S FINANCIAL INCLUSION IN AFRICA

Women’s Financial Inclusion in Africa Barriers, Costs and Opportunities

By Nomsa Daniels

The financial exclusion of women is a global problem with ‘more than 1.3 billion women in the world here is plenty of compelling evidence operating outside the formal financial system’ (Demirguc-Kunt, Klapper & Singer, 2013: 2). This that women are a powerful driver of situation is mirrored in Africa where more than 70 percent of women are financially excluded and Teconomic growth. We know that women where women’s access to finance and financial services is consistently behind that of their male make a significant economic contribution to counterparts (MFW4A, GIZ & New Faces New Voices, 2012). Accelerating women’s financial African economies through their entrepre- inclusion thus requires bold and sustained action to advance women’s economic opportunities neurial activities and involvement in the labour and rights and to ensure that they can meaningfully participate in the economy without undue market. We also know that women are good constraints and barriers that limit their progress. savers and that they plough back most of their income into improving the well-being of their families. To increase their economic opportu- nities, women need a level playing field with a sound educational foundation, more and better jobs, a business and legal climate that supports their economic pursuits, a financial sector that gives them access to affordable financial services tailored to their needs as well as and the recognition of their importance as a market segment which should be cultivated because it makes good business sense. This paper examines the persistent chal- lenges women face in accessing finance and financial services, why gender-specific barriers exist and what they are, factors that will con- tribute to removing these barriers and why women require more innovative support from the financial sector to transcend these barriers and harness their full economic potential.

Women’s Unrecorded Economic Contributions The role women play as important economic agents is largely obscured by the fact that the majority work in the informal sector where their contribution is not adequately quanti- fied or measured. As Jerven argues in his book on the problem with African statistical data, the ‘unrecorded economy’ in Africa, to which women contribute significantly, continues to be undervalued and underappreciated because of the unavailability of reliable and credible data (Jerven, 2013). Nevertheless, some data is worth mentioning. On average, women have high rates of labour force partici- Women's unrecorded economic contributions OSISA.ORG 35 BUWA

pation, above 60 percent in many sub-Saharan largely because they continue to ‘suffer from It found that ‘as many as 70 percent of women- African countries. Most women tend to work in invisibility, stigmatization, violence, harassment, owned SMEs in the formal sector in develop- the agricultural sector and produce most of the poor working conditions and lack of recognition ing countries are unserved or under-served by food that feeds our families, communities and of their economic contribution’ (UN Women, financial institutions,’ leading to a financing nations. However, when it comes to accessing 2010: 2). gap of around US$285 billion (Goldman Sachs credit and other forms of agricultural finance, Although the percentage of female entre- Research Division, 2014: 3). In Sub-Saharan the share of women’s access to resources drops preneurs in the formal economy is smaller in Africa, the financing gap for women is estimated precipitously with some researchers estimat- Africa, relative to other parts of the world, as a at around US$20 billion but is probably higher ing that women ‘receive under ten percent of all continent, Sub-Saharan Africa has high levels of given the large number of women business the credit going to small farmers and only one entrepreneurship with the proportion of male- owners in the informal sector. Although micro- lending programmes are widely available for women throughout the region, a preliminary review of funding institutions that target SMEs instead of micro-enterprises suggests that the barriers for accessing finance for this segment of the market may be even greater. In short, women entrepreneurs continue to receive only a small Although the percentage of fraction of the total capital available for SME investment across Africa. female entrepreneurs in the formal Barriers Women Face in economy is smaller in Africa, relative to Accessing Finance So what are the barriers that women face in other parts of the world, as a continent, accessing finance? Women business owners face a wide spectrum of challenges, many of Sub-Saharan Africa has high levels of which have been documented in numerous studies and reports. These include, but are not limited to, lower levels of education and financial entrepreneurship with the proportion of literacy, lower income levels, lack of tangible assets or collateral, legal constraints, time and male-owned businesses to female-owned mobility constraints, socio-cultural constraints, inter-role conflicts from juggling domestic and businesses being roughly the same professional roles and a lack of market exposure. Some of these challenges are also faced by men but women are disproportionately affected or, percent of the total credit for the agricultural owned businesses to female-owned businesses in some instances, are uniquely discriminated sector’ in Africa (Clark, 2010: 1). being roughly the same (Herrington & Kelly, against because of their gender. Some of these Within the non-agricultural sector of the 2012). In Uganda, 48 percent of all small and sociocultural constraints go a step further in informal economy, women are also very active medium-sized enterprises (SMEs) are owned by weakening women’s confidence as they seek to in informal cross-border trade, where they are women. In Kenya, the corresponding figure is 49 enter male-dominated spaces in business and involved in a large volume of the goods moved percent. Two notable exceptions are Ghana and finance that are not considered part of their across borders. According to a recent study where the number of female entrepre- traditional domain. by UN Women, ‘official sources report an neurs exceeds that of men (Herrington & Kelly, Researchers have begun to explore the lack average of informal cross border trade in the 2012). Highlighting the dynamism of this sector, of legal parity between men and women when it SADC Region of US$ 17.6 billion per year’ (UN a recent article that cites World Bank data found comes to inheritance laws, laws that govern their Women, 2010: 1). Moreover, ‘the contribution that the world’s fastest growth in women entre- ability to register and run a business, their ability of informal traders to national GDP amounts preneurs is in Africa (Muhumuza, 2014). to work and laws that regulate land and property to 64 percent of value added trade in , Yet, women entrepreneurs maintain that in- ownership. Legal restrictions on women’s ability 46 percent in Mali and 41 percent in ’ adequate access to finance is one of their main to inherit property and restrictions that limit (UN Women, 2010: 1). However, this report is barriers. An attempt to measure the global credit their ability to engage in economic activity also quick to point out the struggles informal gap faced by women was recently undertaken have a direct impact on the ability of women traders face in accessing credit and finance, by the International Finance Corporation (IFC). to access finance because it deprives them of

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acquiring assets that can be used as collateral Code ‘only allows women to open bank accounts owners in terms of productivity and competi- to obtain loans from financial institutions. In a to deposit funds that their husbands gave them tiveness. study entitled ‘Women, Business and the Law: if banks first notify the husbands’ (World Bank & Time and mobility constraints are more Removing barriers to economic inclusion’ the IFC, 2013). In the Ivory Coast, until the law was likely to weigh on women living in rural areas, World Bank and International Finance Corpora- reformed in 2013, ‘only husbands could decide more so than those living in urban areas, due to tion examined the legal regimes in 128 countries on the family residence and could legally stop a lack of infrastructure which makes women’s and found that 21 out of 28 countries in Sub- their wives from working if they deem it against work particularly burdensome. Another time Saharan Africa did not grant ‘equal capacity family interests’ (World Bank & IFC, 2014: 13). In and mobility constraint is proximity to a bank under the law to women and men’ (World Bank the DRC, the Family Code decrees that women or financial institution which inhibits access to & IFC, 2012). Interestingly, the study reveals that are required by law to obey their husbands. As financial services. The percentage of adults in married women have more legal restrictions such, married women must receive authorisa- rural areas who are formally ‘banked’ is consist- than unmarried women. tion from their husbands to sue in civil matters ently lower than adults in urban areas due to the and even to have a bank account (World Bank time and distance they have to travel to reach & IFC, 2014). banks. Women are more likely to suffer in this Even where legal barriers have been regard since the majority live in rural areas. In removed, women are still subject to discrimi- Zambia, for example, a 2009 Finscope survey nation based on customary law or cultural found that 56 percent of people living in rural In Zambia, practices. A requirement in some cultures that areas require more than one hour to reach the a woman must marry a man from the family of nearest bank, compared to only two percent for example, a 2009 her deceased husband limits a woman’s right of people in urban areas who travel the same to inherit her deceased husband’s property. In distance (Zambia Finscope Survey, 2009). The Finscope survey some cultures, following the death of a husband, combined effect of these constraints keeps wives must share the running of the household women back and operating on the margins of found that 56% with a male relative of the deceased or widows society rather than in the economic mainstream. can be chased from their homes by relatives of people living in of their deceased husband. These cultural Lessons Learned in Advancing practices are often difficult to change even when Women’s Financial Inclusion the Constitution says otherwise. Thus, ‘removing Although financial inclusion levels are very low rural areas require discriminatory aspects of legal and regulatory for both men and women in Africa, a one-size- frameworks, particularly with reference to land fits-all approach that fails to take into account more than one hour and property ownership, will be an important differences between men and women will only factor in improving women’s financial inclusion impede progress. Besides being gender blind, to reach the nearest in Africa’ (MFW4A et al., 2012: 10). this type of approach will inhibit the design Lack of education is another serious and implementation of more targeted policy bank, compared to hindrance that affects women’s financial interventions and will also hinder the ability to inclusion levels and the growth of women- measure progress from year to year if men and only two percent owned enterprises as it deprives them of the women are lumped together. necessary skills, experience and judgment to Two qualitative studies recently undertaken of people in urban properly manage their business, analyse the in Mozambique by the International Capital competition and take advantage of opportuni- Corporation (ICC, 2014) and Zambia (Bank of areas who travel ties. Lack of market exposure is a symptom of Zambia, 2014) that researched women’s access such poor education which disproportionally to financial services provide interesting findings the same distance affects women. Women business owners have that can change the way financial institutions less work experience, in general, than their male engage with women and their perceptions counterparts. They are less likely to have been of women as a high-risk group. Both studies employed prior to starting a business and have consider the landscape of financial access for In a more recent version of the study that less wage sector experience than men. They are women in an attempt to understand how women was published in 2014, we find many African also less likely to be employers and are generally from different occupations, income groups and women continuing to face legal barriers in terms self-taught when it comes to managing their geographic areas use financial services and of unequal property rights, rights to economic businesses (Herrington & Kelly, 2012). This gap where the gaps and opportunities lie in increas- activity and rights to act in their own capacity in analysing and seizing business opportunities ing women’s access to financial services. without their husband’s permission (World Bank due to poor business training and exposure is In both Mozambique and Zambia, women & IFC, 2014). In , for example, the Family a serious limiting factor for women business were found to be more active users of informal

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financial services than men, which is not entirely In Zambia, a surprising finding is that women in rural areas. Although cell phone penetration surprising (ICC, 2014; Bank of Zambia, 2014). were more regular users of formal and informal in Africa is very high, women lag behind men in In Mozambique, the study found that rotational financial services than men, even though the sta- cell phone usage and access to cell phones in savings groups (called ‘xitique’), family, friends tistics show that women are less banked (Bank general. In Mozambique, the uptake of mobile and accumulated savings and credit associa- tions (ASCAS) are the three main sources of finance preferred by women. The main reason for this is that women value the ease of access, transparency and minimal costs involved (ICC, 2014). Women also place a high value on the communal aspect of these informal savings groups which thrive on relationships built on trust since the members are often friends or people who live in the same community. This is one reason why informal savings clubs are so successful. Another reason is that they are often more responsive to women’s needs than products designed by banks and other financial institutions which are often difficult to under- stand and expensive to access (ICC, 2014).

In Zambia, a surprising finding is that women were more regular of Zambia, 2014). What is also noteworthy is banking is low, even though it has been shown the limited range of financial services used by to be quicker and more reliable in sending re- users of formal and women, even where more services are available. mittances and transferring funds (ICC, 2014). Despite the existence of six financial providers’ A high percentage of women still prefer to give categories in Zambia – banks, microfinance money to bus drivers who travel between cities informal financial institutions, savings and credit institutions, and towns to take to family members rather than leasing companies, building societies and use mobile money transfers which are quicker services than men, insurance companies – the study found that and safer (ibid). This shows that adopting new only banks and MFIs are used by women technologies is a slow process that requires even though the (Bank of Zambia, 2014: 7). education and training from mobile companies This points to the need to educate women as well as banks. statistics show more widely about the range of products that are In summary, both studies provide a fascinat- available on the market and how these products ing glimpse into how women make important that women are and services can serve their needs. financial decisions, how they save and plan Both studies are also useful in understand- for important purchases and how they con- less banked ing the impact of mobile banking which has the stantly juggle household and business priori- potential to massively expand banking services ties to find the best financial solutions to meet to the poor and previously unbanked, especially their individual and family needs whether

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they are in the formal economy or not. From are accessing finance and financial services is Cornel University Press: Ithaca, NY, US. these findings, it is clear that financial institu- scarce and more research and data disaggrega- • MFW4A, GIZ & New Faces New Voices tions need to do a better job in reaching out tion must be conducted in order to provide the (2012) Policy Brief: Advancing African to women to increase their knowledge on the public and private sectors with information that Women’s Financial Inclusion. From: range of financial products and services they will ultimately change this picture. http://www.africa-platform.org/sites/ can access. It also requires banks to change their default/files/cop_resources/advancing_ mindset and misperceptions about women and Nomsa Daniels is the Executive Director womens_financial_inclusion_0.pdf. start recognising them as an important market of New Faces New Voices, a pan-African Accessed: 30 October 2014. segment. Even though there are 19 commercial advocacy group that aims to increase the • Muhumuza R (2014) World’s fastest banks in Zambia, only one bank offers product participation and influence of women in the growth of women entrepreneurs is in specifically for women, which shows that most financial sector. Africa. The Hamilton Spectator. banks are not really targeting this market (Bank • UN Women (2010) Unleashing the of Zambia, 2014). References Potential of Women Informal Cross • Bank of Zambia (2014) Women’s Border Traders to Transform Intra-African Recommendations Access to Financial Services in Zambia. Trade. From: http://www.unwomen.org/ In conclusion, there is a need for bold and Unpublished report. en/digital-library/publications/2010/3/ concerted action on the part of regulators, • Clark H (2010) Introductory remarks at unleashing-the-potential-of-women- policymakers and other stakeholders in the the Ministerial Breakfast on Economic informal-cross-border-traders-to- financial sector to address the many obstacles Opportunities for the Empowerment transform-intra-african-trade. Accessed: that keep women financially excluded despite of Women in Africa and the Least 30 October 2014. their energy, talent and resourcefulness. A Developed Countries: Access to Land, • World Bank & IFC (2012) Women, critical imperative is the need for funding insti- Credit and Markets. UNDP, New York, Business and the Law: Removing barriers tutions to review their investment mandates in US. to economic inclusion. From: http:// light of their failure to adequately penetrate this • Demirguc-Kunt A, Klapper L & Singer wbl.worldbank.org/~/media/FPDKM/ segment of the SME market. This also illustrates D (2013) Financial Inclusion and Legal WBL/Documents/Reports/2012/ the need to find more innovative funding models Discrimination Against Women: Evidence Women-Business-and-the-Law-2012.pdf. that are adaptable to where women are instead from Developing Countries. Policy Accessed: 30 October 2014. of where banks expect them to be. Similarly, Research Working Paper No. 6416. The getting more capital into the hands of women World Bank, Washington DC, US. must be a priority for governments, develop- • Goldman Sachs Research Division ment finance institutions and commercial banks. (2014) Giving credit where it is due: This will ultimately lead to stronger, more sus- How closing the gap for women-owned tainable businesses, provided they also receive SMEs can drive global growth. Global the necessary training and business develop- Markets Institute. From: http://www. ment support to make them more ‘bankable’. goldmansachs.com/our-thinking/ In a continent where literacy levels are low investing-in-women/gmi-report-pdf.pdf. and women’s education levels are lower than Accessed: 30 October 2014. men’s, the need for financial literacy training • Herrington M & Kelly D (2012) African cannot be underestimated in increasing financial Entrepreneurship: GEM Sub-Saharan inclusion levels. Coupled with this is better Africa Regional Report. From: http:// quality education for girls from an early age www.gemconsortium.org/docs/ to expose them to how financial institutions download/2909. Accessed: 30 operate and the challenges of entrepreneur- October 2014. ship. This goes hand in hand with the need for • ICC (2014) Women’s Access to Financial better consumer protection laws to ensure that Services in Mozambique. From: new entrants into the financial system are not http://www.nfnv.org/wp-content/ misinformed or abused. uploads/2014/06/Mozambique- Finally, there also exists a need to improve Women-Study-Final-Report.pdf. data collection at a national, regional and con- Accessed: 30 October 2014. tinental level to more accurately measure the • Jerven, M (2013) Poor Numbers: How We size and impact of the female economy. Data on Are Misled About African Development how women as consumers and business owners Statistics and What To Do About It.

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